Self-Employment Tax: The Basics of Schedule SE

If you work for yourself, no employer takes Social Security and Medicare tax out of your pay. You pay both parts yourself. The IRS calls this self-employment tax, or SE tax. You figure it on Schedule SE, which goes with your Form 1040. IRS: Self-employment tax

What is the rate?

The SE tax rate is 15.3%. It has two parts:

• 12.4% for Social Security.
• 2.9% for Medicare.

An employee sees these taxes withheld from a paycheck. A self-employed person pays both parts directly. The IRS lets you deduct part of the SE tax when you figure your adjusted gross income, which is covered below.

Who must file Schedule SE?

You must file Schedule SE if your net earnings from self-employment were $400 or more. Net earnings are your business profit minus your business expenses. Sole proprietors and most independent contractors usually figure this profit on Schedule C. The rules apply no matter your age, even if you already receive Social Security or Medicare benefits.

How Schedule SE works

The lines on the form change from year to year, so use the form and instructions for your tax year. In general, the steps are:

1. Start with your net profit from Schedule C.
2. Multiply it by 92.35%. That is the base for SE tax.
3. Apply the 12.4% Social Security part, up to a yearly limit. For 2025, the limit was $176,100 (Schedule SE, line 7). The limit changes each year.
4. Apply the 2.9% Medicare part to the whole base.
5. Add the two parts. The total is your SE tax.

Why file it when the tax is small?

The Social Security Administration uses the information from Schedule SE to figure your future benefits under the Social Security program. The SE tax is separate from income tax. You pay it on top of income tax, and the one-half deduction in the example below only reduces income tax.

An example

Illustration only, with round numbers. Lee has $10,000 of net profit from freelance design work in 2025. Lee has no other self-employment income and no wages.

Step 1: 92.35% of $10,000 is $9,235.

Step 2: 15.3% of $9,235 is about $1,413. That is the SE tax.

Step 3: Lee can deduct half of the SE tax, about $706, when figuring income tax. That deduction goes on Schedule 1 (Form 1040), line 15. It lowers adjusted gross income. It does not lower the SE tax itself.

Does SE tax count toward estimated payments?

Yes. You can use your estimated tax payments to pay SE tax. If you expect to owe $1,000 or more, you may need to make payments during the year. For the payment calendar, read Quarterly Estimated Taxes for Freelancers. For the penalty rules, read Estimated Taxes: The Safe Harbor Rules.

Common questions

• Do I owe SE tax on a side job? If your net earnings from self-employment reach $400, you generally do.
• Is there an extra Medicare tax? Yes, at higher incomes. The IRS adds a 0.9% Additional Medicare Tax when wages and self-employment income go over $200,000 for single filers, $250,000 for married filing jointly, or $125,000 for married filing separately.
• Do caregivers pay this tax? Some in-home caregivers are treated as employees, not self-employed. The IRS has a separate page on family caregivers.

What to do next

1. Find your net profit for the year on Schedule C.
2. If it is $400 or more, plan to file Schedule SE.
3. Check the wage limit and steps in the instructions for your tax year.
4. Set money aside for SE tax and income tax.
5. Claim the one-half deduction on Schedule 1.

This page is general information, not advice about your return. Schedule SE and its instructions have the full steps.

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: About Schedule SE (Form 1040) (https://www.irs.gov/forms-pubs/about-schedule-se-form-1040); IRS: Instructions for Schedule SE (Form 1040) (https://www.irs.gov/instructions/i1040sse); IRS: Schedule SE (Form 1040), 2025 (https://www.irs.gov/pub/irs-pdf/f1040sse.pdf); IRS: Estimated taxes (https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes) This is general information, not advice about your specific return.

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