Understanding Self-Employment Tax
Self-employment tax is one of the biggest surprises for new freelancers and entrepreneurs. When you're employed, your employer pays half of your Social Security and Medicare taxes. When you're self-employed, you pay both halves — 15.3% total on net self-employment earnings. This calculator helps you plan for this obligation and stay current with quarterly payments.
How SE Tax Is Calculated
SE tax is calculated on 92.35% of net self-employment income (not 100%). This 92.35% factor accounts for the employer-side deduction. Then Social Security tax (12.4%) applies on earnings up to $184,500 in 2026, and Medicare tax (2.9%) applies on all earnings. High earners also pay an additional 0.9% Medicare surtax on SE income over $200,000 (single), $250,000 (MFJ) or $125,000 (MFS); this calculator does not include that surtax.
The SE Tax Deduction
You can deduct half of your SE tax as an above-the-line adjustment to income, reducing your AGI. This mirrors the deduction employers receive for their half of FICA. The deduction doesn't reduce SE tax itself — only income tax. If you owe $8,000 in SE tax, you deduct $4,000 from your taxable income, saving you income tax at your marginal rate on that $4,000.
Quarterly Estimated Tax Payments
Self-employed individuals must pay taxes quarterly rather than annually. The 2026 deadlines are April 15, 2026 (Q1), June 15, 2026 (Q2), September 15, 2026 (Q3), and January 15, 2027 (Q4). Failing to make adequate quarterly payments triggers an underpayment penalty. The safe harbor rule: pay at least 100% of prior year tax (110% if AGI exceeded $150,000) or 90% of current year tax.
Reducing Self-Employment Tax
Business expenses reduce net SE income, which directly lowers SE tax. Consider an S-corporation election if net SE income exceeds $60,000–$80,000 — S-corps allow you to split income between salary (subject to payroll tax) and distributions (not subject to SE tax), potentially saving thousands. Consult a CPA before making entity structure changes.