How self-employment tax works in 2026

When you work for yourself, nobody withholds Social Security and Medicare from your pay, so you pay both the employee and the employer halves yourself. That is self-employment (SE) tax, and the IRS calculates it on Schedule SE:

  • Net earnings = 92.35% of your net profit (the 7.65% knocked off mirrors the employer half an employee never sees).
  • Social Security: 12.4% of net earnings, up to the 2026 wage base of $184,500.
  • Medicare: 2.9% of all net earnings, plus an extra 0.9% above $200,000 (single) or $250,000 (married filing jointly).
  • If net earnings are under $400, there is no SE tax.

You then deduct the employer-equivalent half of the SE tax when working out your adjusted gross income, and most sole proprietors also get the qualified business income (QBI) deduction of up to 20% of their business profit. Income tax is charged on what remains, after the standard deduction ($16,100 single, $32,200 married filing jointly for 2026), at the 2026 brackets.

A worked example

A single freelancer with $100,000 of net profit and no other income: net earnings are $92,350, so SE tax is $14,129.55. Half of that, $7,064.78, is deductible, leaving AGI of $92,935. After the $16,100 standard deduction and a QBI deduction of $15,367, taxable income is $61,468, and federal income tax is $8,235. Total: about $22,365, or 22.4% of the profit, which is roughly $5,591 per quarterly payment.

Quarterly estimated taxes

Because nothing is withheld, the IRS expects estimated payments four times a year, normally due April 15, June 15, September 15 and January 15 of the following year (moved to the next business day when a date falls on a weekend or holiday). Paying in each quarter, rather than all at once in April, is how you avoid an underpayment penalty. The safe harbor most people use is to pay at least 100% of last year’s total tax (110% if last year’s AGI was above $150,000). Our guide to quarterly estimated taxes walks through it.

What this estimate leaves out

State and local income tax, credits, itemized deductions, retirement contributions (which lower your income tax — see how much you can put away with the solo 401(k) calculator), the self-employed health insurance deduction, and the stricter QBI rules for specified service businesses (law, health, consulting, financial services and similar), which lose the deduction faster above $201,750 of taxable income (single) or $403,500 (joint) than shown here. For other businesses the calculator applies the phase-in: with nobody on payroll, the deduction shrinks to zero between $201,750 and $276,750 (single), or $403,500 and $553,500 (joint). W-2 wages you enter share the Social Security wage base and count toward the Additional Medicare threshold, as Schedule SE and Form 8959 require. Once profit is steady and high enough, an S corp election can cut the SE tax — run your numbers in the LLC vs. S corp calculator.