Self-employment tax and your hourly rate
As a freelancer you pay Social Security and Medicare tax on your profit: 15.3 percent on 92.35 percent of net profit. In the example that is $13,131 per year, about 14.1% of profit.
How the tax is calculated
Self-employment tax is 15.3 percent of 92.35 percent of your net profit, which is about 14.1 percent of profit up to the Social Security wage base.
- Net earnings: net profit × 92.35% (this mirrors the employer half that employees do not pay tax on).
- Social Security: 12.4% of net earnings up to the 2026 wage base of $184,500, reduced by any W-2 wages that already used part of the base.
- Medicare: 2.9% of all net earnings, no cap.
- Additional Medicare Tax: 0.9% on earnings above $200,000 (single) or $250,000 (married filing jointly).
- Deduction: half of the regular self-employment tax lowers your income tax. The Additional Medicare Tax is not deductible.
Below $400 of net earnings no self-employment tax is due.
What it costs at different profits
At $100,000 of profit the tax is $14,130, about 14.1% of profit.
Single filer without W-2 wages, 2026:
| Net profit | Self-employment tax | Share of profit | Deductible half |
|---|---|---|---|
| $20,000 profit | $2,826 | 14.1% | $1,413 |
| $50,000 profit | $7,065 | 14.1% | $3,532 |
| $100,000 profit | $14,130 | 14.1% | $7,065 |
| $150,000 profit | $21,194 | 14.1% | $10,597 |
| $200,000 profit | $28,234 | 14.1% | $14,117 |
| $250,000 profit | $29,851 | 11.9% | $14,787 |
The share falls at high profits because the 12.4 percent Social Security portion stops at the wage base.
What it means for your rate
Self-employment tax is part of the revenue you need, just like income tax. With the defaults it adds $13,131 to the yearly revenue target, which is $12.01 on every billable hour. Employees do not see this cost because half is paid by the employer, which is one reason a contractor rate must be higher than a W-2 hourly wage.
Freelancing next to a job
W-2 wages use up the Social Security wage base first, so the same $50,000 of freelance profit costs $7,065 without wages and only $1,665 with $190,000 of wages.
Social Security tax stops at the wage base of $184,500 in total, counting your wages. With $50,000 of freelance profit (single filer):
| W-2 wages | Self-employment tax | Share of profit |
|---|---|---|
| $0 | $7,065 | 14.1% |
| $100,000 | $7,065 | 14.1% |
| $190,000 | $1,665 | 3.3% |
Medicare tax and the Additional Medicare Tax still apply, which is why the tax never reaches zero.
The deduction for half of the tax
Half of the self-employment tax is deductible: $7,065 on $100,000 of profit.
The deductible half lowers your income tax, not the self-employment tax itself. If your marginal federal bracket is 22 percent, $7,065 of deduction saves about $1,554. The calculator applies the deduction automatically, together with the health insurance and retirement deductions.
How you pay it
You report it on Schedule SE with your tax return and pay it during the year with your estimated payments on Form 1040-ES, due April 15, June 15, September 15 and January 15. The calculator shows about $5,383 per quarter for all taxes together with the default values.
Frequently asked questions
What is the self-employment tax rate in 2026?
15.3 percent: 12.4 percent Social Security (up to $184,500 of earnings) plus 2.9 percent Medicare, applied to 92.35 percent of net profit.
Is self-employment tax deductible?
Half of it is deductible when you calculate your adjusted gross income. It does not reduce the self-employment tax itself.
Do I pay self-employment tax if I also have a W-2 job?
Yes, on your freelance profit. Your W-2 wages use up part of the Social Security wage base first, so the 12.4 percent portion stops earlier.