Question 1

What is self-employment tax?

Accepted Answer

Self-employment (SE) tax is the self-employed person's version of payroll tax. W-2 employees split FICA taxes 50/50 with their employer. When you're self-employed, you pay both the employee and employer share — 15.3% total (12.4% Social Security + 2.9% Medicare) on your net earnings.

Question 2

Why is SE tax calculated on 92.35% of income, not 100%?

Accepted Answer

The IRS applies SE tax to 92.35% of your net self-employment income (not 100%). This 7.65% reduction simulates the employer-half deduction that W-2 employees receive implicitly — since employers pay half of payroll tax on behalf of employees, the IRS gives self-employed people a comparable adjustment.

Question 3

Can I deduct self-employment tax?

Accepted Answer

Yes — you can deduct half of your SE tax from your gross income on Schedule 1 of Form 1040. This deduction reduces your federal (and potentially state) income tax, partially offsetting the SE tax burden. It does not reduce the SE tax itself.

Question 4

What is the Social Security wage base for 2026?

Accepted Answer

The Social Security wage base for 2026 is $176,100. Social Security tax (12.4%) only applies to net SE earnings up to this amount. Medicare tax (2.9%) applies to all net SE earnings with no cap.

Self-Employment
Tax Calculator

How SE tax works

92.35% Rule

Two Parts

The Deduction