What is the self-employment tax rate?

The self-employment tax rate is a flat 15.3% of net self-employment earnings, made up of two parts: 12.4% for Social Security and 2.9% for Medicare. Every self-employed person pays this rate on their net earnings from self-employment (calculated on Schedule SE) regardless of income level for the Medicare portion, while the Social Security portion applies only up to an annual wage-base cap. The 15.3% is the employer-and-employee share combined, because a self-employed person is both. A W-2 employee and their employer would each pay 7.65% (half of 15.3%) instead.

How does the 12.4% Social Security portion work?

The 12.4% Social Security portion applies to net self-employment earnings only up to the annual Social Security wage base, and no Social Security tax is owed on earnings above that cap. For 2026, the Social Security wage base is $184,500, up from $176,100 in 2025. A preparer calculating SE tax needs the correct year's cap. Earnings from self-employment (after the 92.35% net-earnings adjustment on Schedule SE) above the wage base still owe the 2.9% Medicare portion, just not the 12.4% Social Security portion, so the effective combined rate drops once a taxpayer's net earnings pass the cap in a given year.

How does the 2.9% Medicare portion work?

The 2.9% Medicare portion applies to all net self-employment earnings with no dollar cap, unlike the Social Security portion. There's no wage base or ceiling on the Medicare piece. A taxpayer with net self-employment earnings of $500,000 in a year still owes 2.9% Medicare tax on the full base amount, not just up to some threshold. This is the piece of SE tax that never goes away regardless of how high self-employment income climbs.

What is the Additional Medicare Tax and when does it apply?

The Additional Medicare Tax is an extra 0.9% owed on self-employment income (combined with wages, if any) above a filing-status threshold, on top of the regular 2.9% Medicare portion. The thresholds are $250,000 for married filing jointly, $200,000 for single/head of household/qualifying surviving spouse, and $125,000 for married filing separately, and these thresholds aren't indexed for inflation. They're fixed amounts set by statute. A self-employed taxpayer combines self-employment income with any W-2 wages to test against the threshold, and unlike the regular Medicare tax, there's no employer to withhold the Additional Medicare Tax automatically on SE income. It's calculated and paid through Form 8959 and the taxpayer's estimated payments.

How does a preparer calculate SE tax step by step?

The calculation starts with net profit from Schedule C (or the equivalent), multiplies it by 92.35% to get net earnings from self-employment, then applies the 15.3% combined rate to the portion under the Social Security wage base and 2.9% to any excess, before adding the 0.9% Additional Medicare Tax if the taxpayer crosses their filing-status threshold. Schedule SE walks through this math in order, and the result becomes both a tax owed on Schedule 2 and the basis for a deduction: half of the SE tax is deductible as an adjustment to income on Schedule 1, which lowers the taxpayer's AGI even though it doesn't reduce the SE tax itself. Firms running quarterly estimates for self-employed clients need this full stack, not just the flat 15.3% headline rate, to avoid underestimating a high earner's total liability once the Additional Medicare Tax kicks in.