Self-Employment Tax Explained 2026
Complete guide to self-employment tax rate, calculation, and strategies to reduce it.
What Is Self-Employment Tax?
Self-employment (SE) tax is the combined Social Security and Medicare tax that self-employed individuals must pay. It equals 15.3% of your net earnings from self-employment — 12.4% for Social Security and 2.9% for Medicare.
How It Differs From Employee Taxes
Employees pay 7.65% (matched by their employer). As a self-employed individual, you effectively pay the full 15.3% — but you can deduct half of the SE tax as an adjustment to income.
Income Cap for Social Security Tax
Social Security tax only applies to the first $176,100 of net earnings in 2026 (subject to inflation adjustment). Medicare tax has no cap.
Net Earnings from Self-Employment
To calculate SE tax, start with your Schedule C net profit. Multiply by 92.35% (only that portion is subject to SE tax). Then apply 15.3%.
Strategies to Reduce SE Tax
- Deduct half of SE tax on Form 1040 (above-the-line deduction).
- Retirement contributions — SEP-IRA and Solo 401(k) reduce net earnings subject to SE tax.
- Business deductions — the more legitimate expenses you deduct, the lower your SE tax base.
- elect S Corp status — split earnings into salary (subject to payroll tax) and distributions (not subject to SE tax).
Track your contractor payments and deductions with our free paystub generator and W-9 wizard.