Glossary
Self-employment tax
Definition
Self-employment tax is the Social Security and Medicare tax paid by the self-employed on net earnings: 15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net profit2026 · IRS. Half is deductible in figuring income tax. No SE tax is due below $400 of net SE earnings2026 · IRS of net earnings.
How self-employment tax works
It mirrors the employee and employer shares of FICA combined. The Social Security part stops at the $184,5002026 · SSA wage base.
Ministers pay SE tax on wages and housing allowances unless exempt.
Why it matters to a firm
It's the biggest surprise for new freelancers and the gateway to estimated payments, retirement plans and entity planning.
Questions about self-employment tax
Is SE tax in addition to income tax?
Yes.
Can an S corporation reduce it?
Possibly, through reasonable salary plus distributions.
Is half deductible?
Yes, as an adjustment to income.
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Related terms: FICA · Social Security wage base
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