Lesson
Self-employment taxes
- Published:
- October 12, 2026
- Review status:
- Needs verification — carefully written, not yet checked by a qualified professional
Needs verification
- Current self-employment tax rate and Social Security wage base cap, as these can be adjusted periodically.
We left these specific numbers out until they're checked against current official sources.
AThe super simple explanation
If you work for yourself (freelancing, gig work, running a business), you generally owe self-employment tax in addition to regular income tax.
Self-employment tax covers Social Security and Medicare, which a traditional employer and employee normally split.
Because there's no employer to split the cost, self-employed people pay both the employee and employer portions.
Self-employed people with significant income typically need to make estimated quarterly tax payments throughout the year.
BWhy does this even matter?
- Not planning for self-employment tax can lead to a much larger tax bill than expected at filing time.
- Understanding the combined tax burden helps you price freelance or gig work appropriately and set aside enough for taxes.
- Making estimated quarterly payments helps avoid penalties and large lump-sum tax bills.
COkay, how does it work?
DShow me an example
A freelance writer
Jordan earns $20,000 freelancing in a year, with $4,000 in business expenses, leaving $16,000 in net earnings.
She owes self-employment tax on that $16,000 in addition to regular income tax, and she makes quarterly estimated payments to avoid a big bill in April.
Illustrative example with made-up people and numbers — not current rates or rules.
EWords you should know
- Self-employment tax
- Social Security and Medicare tax paid by self-employed individuals, covering both the employer and employee shares.
- Schedule SE
- The IRS form used to calculate self-employment tax.
- Schedule C
- The IRS form used to report income and expenses from a self-employed business or sole proprietorship.
- Form 1040-ES
- The IRS form and worksheet used to calculate and pay estimated quarterly taxes.
FCommon mistakes
- Spending all freelance or gig income without setting aside money for self-employment and income tax.
- Not tracking business expenses, which could otherwise reduce taxable net earnings.
- Skipping estimated quarterly payments and facing a large bill (and possible penalty) at filing time.
- Forgetting to deduct half of self-employment tax as an income adjustment when filing.
GThings to know
- Self-employment tax generally applies once net self-employment earnings reach $400 or more in a year.
- You can deduct half of your self-employment tax when calculating your income tax, partially offsetting the cost.
- Keeping track of business expenses throughout the year can meaningfully reduce the net earnings subject to tax.
- Many self-employed people set aside a percentage (often 25–30%, depending on their situation) of each payment they receive specifically for taxes.
HQuick recap
- Self-employment tax covers the Social Security and Medicare contributions a traditional employer would normally share.
- It applies once net self-employment earnings reach $400 or more.
- Self-employed people can deduct business expenses and half of their self-employment tax.
- Estimated quarterly payments help avoid a large tax bill and possible penalty at filing time.
IQuestions people are too embarrassed to ask
JQuiz me
Totally optional. Nobody's grading you.
KWhat next?
- 1.Set aside a percentage of each self-employment payment specifically for taxes.
- 2.Review IRS Form 1040-ES to see if you should be making estimated quarterly payments.
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