What Is Self-Employment Tax?
Self-employment tax is the Social Security and Medicare tax that self-employed individuals pay on their net earnings. Unlike W-2 employees who split these taxes with their employer, freelancers and independent contractors are responsible for the full 15.3% — broken down as 12.4% for Social Security (on income up to $176,100 in 2026) and 2.9% for Medicare.
If your net self-employment income exceeds $200,000 ($250,000 for married filing jointly), you'll also owe an additional 0.9% Medicare surtax. This tax is calculated on Schedule SE (Form 1040).
How to Calculate Self-Employment Tax in 2026
Here's the step-by-step formula the IRS uses:
- Start with gross 1099 income — all payments received from clients.
- Subtract business expenses — deductible costs reported on Schedule C.
- Multiply by 92.35% — the IRS only taxes 92.35% of your net self-employment income (this mirrors the employer-side deduction W-2 workers get).
- Apply the 15.3% SE tax rate — 12.4% Social Security + 2.9% Medicare.
- Deduct the employer half — you can deduct 50% of your SE tax from your adjusted gross income on Schedule 1.
How Business Deductions Lower Your Tax Bill
Every dollar you deduct as a legitimate business expense reduces both your income tax and your self-employment tax. Common deductions for freelancers include:
- Home office expenses (simplified or actual method)
- Computer, software, and equipment (Section 179)
- Internet and phone bills (business-use percentage)
- Business travel, meals, and transportation
- Health insurance premiums (100% deductible for self-employed)
- Retirement contributions (SEP IRA up to $69,000 in 2026)
The key is keeping records of every expense. Learn more in our guide on 20 tax write-offs freelancers commonly miss.
Quarterly Estimated Tax Payments
The IRS requires self-employed individuals to make quarterly estimated tax payments using Form 1040-ES. If you don't pay enough throughout the year, you may face underpayment penalties. The 2026 due dates are April 15, June 15, September 15, and January 15 of the following year.
Stop Overpaying — Track Every Deduction
Most freelancers overpay taxes simply because they forget to track expenses. A receipt scanner for taxes like TaxLens automatically captures, categorizes, and stores every business expense — so you can claim the maximum deduction and keep more of what you earn.