# 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.

## Sources

- [IRS: Self-employment tax (Social Security and Medicare taxes)](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes)
- [IRS Topic no. 554: Self-employment tax](https://www.irs.gov/taxtopics/tc554)
- [IRS: Instructions for Schedule SE](https://www.irs.gov/instructions/i1040sse)
- [IRS: About Form 1040-ES](https://www.irs.gov/forms-pubs/about-form-1040-es)

Updated October 2026. Simplified estimate, not tax or legal advice.