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.
Finn does your books in United States
AccountsOS runs full accounting for United States businesses, tax, deadlines and invoicing, in plain English. Ask Finn about yours, no signup needed.
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