What is self-employment tax?
When you work for an employer, Social Security and Medicare taxes are split: you pay 7.65% and your employer pays 7.65%. When you work for yourself, you pay both halves — a combined 15.3% known as self-employment (SE) tax. It applies on top of regular income tax, which is why first-year freelancers are so often shocked at tax time.
The math has two quirks that work in your favor. First, SE tax applies to only 92.35% of your net profit (this mirrors the employer-half exclusion W-2 workers get). Second, you deduct half of your SE tax from your income before computing income tax.
The two pieces of SE tax
- Social Security: 12.4% on SE earnings up to the wage base ($176,100 for 2025; $184,500 for 2026). If you also have W-2 wages, those count against the cap first.
- Medicare: 2.9% on all SE earnings, with no cap, plus an additional 0.9% once combined earnings exceed $200,000 (single) or $250,000 (married filing jointly).
The QBI deduction: 20% off your taxable profit
Most self-employed people qualify for the Qualified Business Income (QBI) deduction — made permanent by the OBBBA — which removes 20% of business profit from income tax (not from SE tax). For 2026, limits begin phasing in above $201,775 of taxable income for single filers ($403,500 joint). Below those thresholds, the deduction is essentially automatic for sole proprietors, and this calculator includes it.
Quarterly estimated taxes: the deadline trap
The IRS expects tax as you earn. If you'll owe $1,000 or more, you generally must pay quarterly estimates — for 2026: April 15, June 15, September 15, 2026, and January 15, 2027. The reliable safe harbor: pay at least 100% of last year's total tax (110% if your AGI exceeded $150,000), split into four payments, and you'll owe no penalty regardless of how much you make this year. See all dates in our 2026 tax deadline guide.
Worked example: $60,000 freelance profit (2026, single)
- SE taxable base: $60,000 × 92.35% = $55,410
- SE tax: $55,410 × 15.3% = $8,478
- Half-SE deduction: −$4,239 → AGI $55,761; minus standard deduction $16,100; minus QBI ≈ $7,932 → taxable income ≈ $31,729
- Income tax ≈ $3,560 → total federal bill ≈ $12,038, about $3,010 per quarter
Deductions freelancers forget
Home office (simplified: $5/sq ft up to 300 sq ft), health insurance premiums (an above-the-line deduction for the self-employed), retirement contributions through a Solo 401(k) or SEP-IRA (up to tens of thousands per year), business mileage, software subscriptions, and the business-use share of phone and internet. Every dollar of legitimate expense saves both income tax and 15.3% SE tax.