What is Self-Employment Tax?
Self-employment tax is the US federal tax that covers Social Security and Medicare contributions for self-employed people, sole proprietors, and partners. The combined rate is 15.3% (12.4% Social Security + 2.9% Medicare) on net self-employment earnings.
Current Rate (Calendar year)
15.3% (12.4% Social Security up to wage base + 2.9% Medicare uncapped + 0.9% additional Medicare above $200k single/$250k joint)
Example
A freelancer with $80,000 net self-employment income pays 12.4% × $80,000 = $9,920 Social Security + 2.9% × $80,000 = $2,320 Medicare = $12,240 SE tax. They can deduct half of this ($6,120) as an above-the-line deduction.
How Self-Employment Tax works in United States
Social Security portion (12.4%) applies up to the wage base — $168,600 for 2024, indexed annually. Medicare (2.9%) has no cap, and incomes above $200,000 (single) or $250,000 (joint) attract an additional 0.9% Medicare surtax.
Self-employed people pay both the employee and employer portions of FICA, hence the 15.3% combined rate. They get to deduct half (the employer-equivalent portion) as an adjustment to gross income on Form 1040 Schedule 1, reducing their income tax base by approximately 7.65% of net SE earnings.
Confused by United States accounting jargon?
AccountsOS explains United States terms in plain English and applies the right rules to your books automatically.
Try Free