How self-employment tax works for freelancers

When you work as a W-2 employee, your employer withholds Social Security and Medicare and pays half of those taxes for you. On 1099 income, you pay both halves yourself — that is self-employment (SE) tax, often quoted as 15.3% on net business profit.

The 92.35% base

The IRS does not apply 15.3% to every dollar on Schedule C. Only 92.35% of your net profit is subject to SE tax. That adjustment mirrors the employer half an employee never sees in cash wages.

Social Security cap

The 12.4% Social Security portion stops at the annual wage base (published by SSA each fall). Medicare (2.9%) continues on all net earnings, with an extra 0.9% additional Medicare tax above the threshold for high earners.

SE tax is not your whole tax bill

SE tax is separate from federal income tax. You also get to deduct half of your SE tax above the line, which lowers AGI before the standard deduction and brackets kick in. Our self-employment tax calculator runs both pieces together so you see a total estimate, not just the 15.3% headline rate.