# What Is Self-Employment Tax?

Self-employment tax is the Social Security and Medicare tax that self-employed people pay on their own earnings. The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare, applied to 92.35% of net self-employment earnings. For 2026 the Social Security part stops at $184,500 of earnings. It applies once net earnings reach $400.

## Key takeaways

- The rate is 15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net profit, about 14.1% of profit.
- For 2026, the 12.4% Social Security part applies only to the first $184,500 of combined wages and self-employment earnings. Medicare has no cap.
- You owe it once net self-employment earnings are $400 or more, and you figure it on Schedule SE.
- Half of your SE tax is deductible when figuring adjusted gross income, which lowers income tax, but not SE tax itself.
- An extra 0.9% Additional Medicare Tax applies above $200,000 (single), $250,000 (married filing jointly) or $125,000 (married filing separately).

> **Which year these numbers are for**
>
> Rates and the $184,500 wage base are for **tax year 2026**, from IRS Topic 554 and the 2026 Form 1040-ES, checked October 12, 2026. General information only, not tax advice.

## How self-employment tax works

When you work for wages, you and your employer each pay half of Social Security and Medicare: 7.65% each. When you work for yourself, you are both sides, so you pay the full 15.3%. That's self-employment tax, often shortened to SE tax. It funds the same Social Security and Medicare benefits, and the earnings it's paid on count toward your future Social Security record.

It's separate from income tax. A contractor with a modest profit and lots of deductions can owe little or no income tax and still owe thousands in SE tax, because SE tax is figured on net earnings before the standard deduction, the QBI deduction or most other personal deductions.

## How to calculate self-employment tax

**2026 self-employment tax**

```
SE tax = (min(N, $184,500 − W) × 12.4%) + (N × 2.9%), where N = net profit × 92.35%
```

Where:
- N = net earnings from self-employment: Schedule C profit × 0.9235
- W = W-2 wages already subject to Social Security tax this year (zero if you have none)
- $184,500 = the 2026 maximum earnings subject to Social Security tax

Why 92.35%? It mirrors the employee side. An employer's half of the tax isn't counted as the worker's wages, so the IRS lets you reduce your net profit by 7.65% (100% − 7.65% = 92.35%) before applying the rate.

> **Example: three contractors, three profit levels (2026)**
>
> These are illustrative examples for single filers with no W-2 wages.
>
> **Electrician, $90,000 profit.** $90,000 × 92.35% = $83,115. Social Security: $83,115 × 12.4% = $10,306.26. Medicare: $83,115 × 2.9% = $2,410.34. **SE tax: $12,716.60.** Deductible half: $6,358.30.
>
> **HVAC owner, $200,000 profit.** $200,000 × 92.35% = $184,700. Social Security stops at $184,500: $184,500 × 12.4% = $22,878. Medicare: $184,700 × 2.9% = $5,356.30. **SE tax: $28,234.30.**
>
> **Roofing owner, $250,000 profit.** $250,000 × 92.35% = $230,875. Social Security is still capped at $22,878. Medicare: $230,875 × 2.9% = $6,695.38. **SE tax: $29,573.38.** He also owes 0.9% Additional Medicare Tax on $30,875 above the $200,000 single threshold, about $277.88, figured on Form 8959.

Try your own numbers with the [self-employment tax calculator](https://www.brix.so/tools/self-employment-tax-calculator), then fold the result into your [quarterly estimated taxes](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors).

## Who has to pay self-employment tax?

Per IRS Topic 554, you generally owe SE tax if your net earnings from self-employment are **$400 or more**. That covers sole proprietors and single-member LLC owners filing Schedule C, and partners in a business taxed as a partnership, which includes many multi-member LLCs (how much of an LLC member's share is subject to SE tax can depend on their role, so ask your CPA). Your 1099-NEC income from general contractors or property managers counts, and so does cash and card income nobody reports on a form.

S corporation owners are the main exception. Profit that passes through an S corp isn't subject to SE tax, but the owner must pay themselves a reasonable W-2 salary, and that salary carries regular payroll taxes. See [reasonable salary for S corp owners](https://www.brix.so/learn/reasonable-salary-s-corp) and [S corp vs. LLC for contractors](https://www.brix.so/learn/s-corp-vs-llc-for-contractors).

## Self-employment tax vs. income tax

**Two different taxes on the same profit**

|  | Self-employment tax | Federal income tax |
| --- | --- | --- |
| What it funds | Social Security and Medicare | General federal revenue |
| Rate | Flat 15.3% (12.4% + 2.9%) on 92.35% of profit | Progressive brackets, 10% to 37% for 2026 |
| Cap | Social Security part capped at $184,500 of 2026 earnings | No cap |
| Reduced by standard deduction? | No | Yes |
| Reduced by QBI deduction? | No | Yes |
| Reduced by business expenses? | Yes, it's figured on net profit | Yes |
| Form | Schedule SE | Form 1040 |

_Sources: IRS Topic 554; Rev. Proc. 2025-32 for 2026 brackets._

## The half-SE-tax deduction

You can deduct half of your SE tax as an adjustment to income on Schedule 1. In the $90,000 example above, that's $6,358.30 off adjusted gross income. It lowers income tax only. It does not reduce the SE tax itself, and it isn't a business expense on Schedule C.

## SE tax by trade: where it bites

**How SE tax shows up in different trades**

| Trade | Typical setup | What to know |
| --- | --- | --- |
| HVAC | Owner-operator growing to a few techs | Once profit passes about $199,800 (where 92.35% hits $184,500), only the 2.9% Medicare part keeps growing. Many owners start S corp conversations around here. |
| Plumbing | Solo or two-truck shop | SE tax is often larger than income tax. Budget for both. |
| Roofing | Owner plus subs paid on 1099s | Subs pay their own SE tax. If they're really employees, you owe payroll taxes. See [W-2 vs. 1099](https://www.brix.so/learn/w2-vs-1099). |
| Electrical | Licensed master with a W-2 side job | W-2 wages count toward the $184,500 Social Security cap first, which can cut SE tax. |
| Landscaping | Seasonal crew, owner on the mower | Low winter profit doesn't change the math; SE tax is figured on the full year. |
| Cleaning | Owner-operator, low overhead | High profit margin means a larger share of revenue is subject to SE tax. |

_Illustrative patterns, not measured data._

## Ways contractors legally lower self-employment tax

- **Claim every legitimate business expense.** SE tax is figured on net profit, so a [deduction](https://www.brix.so/learn/contractor-tax-deductions-list) like [mileage](https://www.brix.so/learn/mileage-deduction-for-contractors), tools or a [home office](https://www.brix.so/learn/home-office-deduction-for-contractors) cuts SE tax and income tax.
- **Time equipment purchases.** [Section 179](https://www.brix.so/learn/section-179-deduction) and [bonus depreciation](https://www.brix.so/learn/bonus-depreciation) reduce Schedule C profit, which lowers SE tax too.
- **Consider an S corporation, carefully.** It can lower total payroll and SE taxes for some profitable owners, but the reasonable-salary rules, payroll costs and state fees mean it isn't automatically a win. A CPA should run the numbers.
- **Don't misclassify workers.** Paying employees as 1099 subs to dodge payroll tax creates back taxes and penalties.

## Common mistakes

- Forgetting SE tax when [setting money aside](https://www.brix.so/learn/how-much-to-set-aside-for-taxes), then facing a bill twice the size expected.
- Applying 15.3% to full profit instead of 92.35% of it, which overstates the tax slightly.
- Ignoring W-2 wages from a second job, which reduce the room left under the $184,500 cap.
- Deducting the half-SE amount on Schedule C. It belongs on Schedule 1.

BRIX keeps job revenue and expenses categorized and synced with QuickBooks, so your profit number, the base for SE tax, is current all year, and it reminds you before each quarterly estimate date. BRIX doesn't file taxes or give tax advice.

- [Bookkeeping and tax help](https://www.brix.so/features/bookkeeping-taxes): Keeps expenses categorized, tracks 1099 subcontractors and sales tax, and reminds you of quarterly estimated tax dates. BRIX does not file taxes or give tax advice.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.

See the [contractor taxes guide](https://www.brix.so/guides/contractor-taxes) for the full picture, or how [BRIX bookkeeping and tax help](https://www.brix.so/features/bookkeeping-taxes) works.

## Frequently asked questions

### What is the self-employment tax rate for 2026?

It's 15.3% on 92.35% of net self-employment earnings: 12.4% for Social Security and 2.9% for Medicare. For 2026, the Social Security part applies to the first $184,500 of combined wages and self-employment earnings. Medicare has no cap.

### At what income do you have to pay self-employment tax?

You generally owe self-employment tax when net earnings from self-employment are $400 or more for the year, per IRS Topic 554. That threshold applies to net profit, not gross revenue.

### Is self-employment tax on top of income tax?

Yes. Self-employment tax and income tax are separate. You figure SE tax on Schedule SE and income tax on Form 1040, then pay both, usually through quarterly estimated payments. Half of SE tax is deductible when figuring income tax.

### How do I calculate self-employment tax?

Multiply net profit by 92.35%. Multiply the result, up to $184,500 for 2026 minus any W-2 Social Security wages, by 12.4%. Multiply the full result by 2.9%. Add the two. On $90,000 of profit with no W-2 wages, that's $12,716.60.

### Does an LLC pay self-employment tax?

The owner of a single-member LLC taxed as a sole proprietorship pays SE tax on its profit, and members of an LLC taxed as a partnership who work in the business generally do too. An LLC that elects S corporation status pays payroll tax on the owner's salary instead of SE tax on all profit.

### Can business expenses reduce self-employment tax?

Yes. SE tax is figured on net profit from Schedule C, so every legitimate business deduction lowers it. Personal deductions such as the standard deduction, and the QBI deduction, don't reduce SE tax.

## Related

- [How Much Should You Set Aside for Taxes When You're Self-Employed?](https://www.brix.so/learn/how-much-to-set-aside-for-taxes)
- [Quarterly Estimated Taxes for Contractors: How They Work in 2026](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors)
- [S Corp vs. LLC for Contractors: Which Is Better?](https://www.brix.so/learn/s-corp-vs-llc-for-contractors)
- [What Is a Reasonable Salary for an S Corp Owner?](https://www.brix.so/learn/reasonable-salary-s-corp)
- [W-2 vs. 1099: What's the Difference for Contractors?](https://www.brix.so/learn/w2-vs-1099)
- [What Is the QBI Deduction?](https://www.brix.so/learn/qbi-deduction)
- [Self-Employment Tax Calculator (2026)](https://www.brix.so/tools/self-employment-tax-calculator)
- [Taxes for Contractors: The 2026 Guide for Self-Employed Trades Owners](https://www.brix.so/guides/contractor-taxes)
- [Bookkeeping for contractors that keeps your books tax-ready all year](https://www.brix.so/features/bookkeeping-taxes)
- [Quarterly Estimated Tax Calculator for Self-Employed Contractors (2026)](https://www.brix.so/tools/quarterly-estimated-tax-calculator)

## Sources

- [IRS: Topic No. 554, Self-Employment Tax](https://www.irs.gov/taxtopics/tc554) (checked 2026-10-12)
- [IRS: 2026 Form 1040-ES, Self-Employment Tax and Deduction Worksheet ($184,500 for 2026)](https://www.irs.gov/pub/irs-pdf/f1040es.pdf) (checked 2026-10-12)
- [IRS: Rev. Proc. 2025-32 (2026 tax rate schedules)](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf) (checked 2026-10-12)
- [IRS: Publication 334 (2025), Tax Guide for Small Business](https://www.irs.gov/pub/irs-pdf/p334.pdf) (checked 2026-10-12)

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Written by BRIX Editorial Team. Last updated 2026-10-12. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/learn/self-employment-tax