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How self-employment tax works

By Jude Wallis

Self-employment tax is Social Security plus Medicare charged on net earnings from self-employment. The tax base is 92.35 percent of net. On $80,000 of net, that base is $73,880 and the tax is $11,303.64. Half of that tax, $5,651.82, is the deductible half on this sheet.

Take-home this check

$1,607.00

80.35% of gross. FICA is $153.00.

Gross
$2,000.00
Social Security (6.2%)
$124.00
Medicare (1.45%)
$29.00
Federal withholding
$240.00
State withholding
$0.00
Take-home
$1,607.00
$
%

A rate you type, not a bracket table. Use the percent on a pay stub or a guess.

%
$

The annual wages Social Security still taxes. The statutory figure is reset each year.

On this page

Next on Class and household

A 50/30/20 split

In short

  • The SE tax base is 92.35 percent of net earnings, which is 100 percent minus the 7.65 percent employer-equivalent half.
  • On $80,000 of net, the base is $73,880. At 15.3 percent the tax is $11,303.64, and the deductible half is $5,651.82.
  • On $40,000 of net, the base is $36,940, the tax is $5,651.82, and the deductible half is $2,825.91.
  • The 15.3 percent teaching calculation applies the ordinary combined rate. The Social Security wage base and additional Medicare rules can change an actual result.

Both halves, on a shrunk base

An employee sees 6.2 percent Social Security plus 1.45 percent Medicare withheld from a check, with a matching amount paid by the employer. A self-employed filer pays both halves. The combined statutory rate is 15.3 percent.

The base is not the full net. It is 92.35 percent of net earnings from self-employment, which is 1−0.07651 - 0.0765. That shrinkage is the employer-equivalent half, applied before the 15.3 percent. On $80,000 of net:

0.9235×80000=738800.9235 \times 80000 = 73880

The base is $73,880. Then 0.153×73880=11303.640.153 \times 73880 = 11303.64, so the tax is $11,303.64.

How FICA works is the employee withholding picture. This page is the self-employed combined tax on net.

The deductible half is not a refund of the tax

On this sheet, half of the SE tax is $5,651.82 on the $80,000 net, and $2,825.91 on the $40,000 net. That half is an above-the-line deduction against ordinary income on a United States return in the usual design. It reduces income tax. It does not cancel the SE tax itself.

The paycheck calculator shows the employee route, where Social Security and Medicare are split between worker and employer. Self-employment tax carries both sides through the business return.

The marginal tax rate is the income-tax rate affected by the deduction. Net pay on a wage stub is a different leftover.

The wage base is an extra ceiling

Social Security, whether withheld as FICA or charged as self-employment tax, has an annual wage base. Medicare does not have that ceiling in the ordinary case. Wages from employment and self-employment earnings can interact when applying the Social Security base.

The specified examples apply 12.4 percent Social Security and 2.9 percent Medicare to the full adjusted base, producing the combined 15.3 percent rate. If covered earnings reach the annual wage base, the Social Security portion stops while Medicare continues, and additional Medicare rules can also apply.

Scope of this sheet

The figures are net earnings of $80,000 and $40,000, a 92.35 percent base, a 15.3 percent combined rate, and a deductible half. An actual return applies business expenses, wage-base coordination, additional Medicare rules, business form, and current law.

Keep self-employment tax, its deductible half, and income tax as three separate lines. This is educational material, not financial advice.

Worked examples

SE tax on \$80,000 of net

Net earnings from self-employment are $80,000. Using 92.35 percent of net as the base and 15.3 percent as the combined rate, what is the tax and the deductible half?

  1. The base is 0.9235×80000=738800.9235 \times 80000 = 73880, so $73,880.
  2. Tax is 0.153×73880=11303.640.153 \times 73880 = 11303.64, so $11,303.64.
  3. The deductible half is $5,651.82.

On $80,000 of net, the SE tax base is $73,880, the tax is $11,303.64, and the deductible half is $5,651.82.

SE tax on \$40,000 of net

Net earnings are $40,000. Same 92.35 percent base and 15.3 percent combined rate. What is the tax?

  1. The base is 0.9235×40000=369400.9235 \times 40000 = 36940, so $36,940.
  2. Tax is 0.153×36940=5651.820.153 \times 36940 = 5651.82, so $5,651.82.
  3. The deductible half is $2,825.91.

On $40,000 of net, the SE tax base is $36,940, the tax is $5,651.82, and the deductible half is $2,825.91.

Common questions

Is self-employment tax the same as income tax?

No. SE tax is Social Security and Medicare on net earnings. Income tax is a stacked schedule on taxable income. A self-employed filer can owe both.

Why is the base 92.35 percent rather than all of net?

The 7.65 percent employer-equivalent half is removed before the 15.3 percent is applied, so the self-employed filer is not charged 15.3 percent on a base that already includes that half.

Keep reading

This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.