Self-Employment Tax Calculator: Where the 15.3% Goes

The first year of freelancing usually contains one unpleasant surprise, and it is not the income tax. It is the separate bill for Social Security and Medicare, which an employer used to split with you and now does not.

Where the 15.3% comes from

An employee pays 7.65% of wages into Social Security and Medicare, and the employer quietly pays a matching 7.65% that never appears on the payslip. Self-employed, you are both parties, so the rate is 15.3%. That splits into 12.4% for Social Security and 2.9% for Medicare.

Two adjustments soften it. The tax applies to 92.35% of net profit rather than all of it, which stands in for the employer half being a deductible business cost. And half of whatever you pay is deductible against your income tax. That deduction does not reduce the self-employment tax itself, only the income tax sitting on top of it.

The Social Security cap and the Medicare surtax

The 12.4% portion stops at an annual earnings cap that the Social Security Administration resets each year in line with average wages. It was $176,100 for 2025, so look up the figure for the year you are actually filing rather than reusing last year's. Above the cap only the 2.9% Medicare piece continues, and that piece never stops. Higher earners add a further 0.9% on earnings above $200,000 filing single or $250,000 married filing jointly.

Two worked examples

$60,000 of profit and no other job

Take 92.35% of $60,000 and you get $55,410. Multiply by 15.3% and the self-employment tax is $8,477.73. Half of that, $4,238.87, comes off your taxable income before the federal income tax calculation even begins. The same profit is charged by two separate systems, and only one of them is the one people budget for.

$18,000 of side income alongside a salary

Same arithmetic: $18,000 × 92.35% = $16,623, times 15.3% is $2,543.32. But if the day job already paid you past the Social Security cap, the 12.4% part is used up and only the 2.9% applies, which cuts the bill to roughly $482. That is why the calculator asks for your W-2 wages instead of just the freelance number.

How to use the calculator

The figure it wants is net profit, not revenue: gross receipts minus deductible business expenses, the bottom line of Schedule C. Add W-2 wages if you also hold a job, because those consume the Social Security cap first, and set your filing status so the additional Medicare threshold is right.

Below $400 of net earnings there is no self-employment tax and the calculator returns zero. Above it you owe on the whole amount, not just the part over $400. Church employee income has a lower threshold and its own rules, which is a question for an accountant rather than a calculator.

UK readers, none of this applies. Self-employed National Insurance is Class 4 with a Class 2 layer, charged at different rates on different bands, and it works nothing like a flat 15.3%.

Common questions

Do I have to pay quarterly? If you expect to owe $1,000 or more for the year, yes, in four estimated payments. Missing them brings an underpayment penalty even if you settle in full the following April. Setting aside 25% to 30% of every invoice covers the self-employment tax and a reasonable slice of the income tax.

Does forming an LLC change what I owe? A single-member LLC taxed as a sole proprietorship, no. Same 15.3% on the same profit. An S corporation election can change the picture, because only the salary half gets charged. Split $80,000 of profit into a $50,000 salary and $30,000 of distributions and the 15.3% skips that $30,000, which is $4,590 kept. Against that sit payroll filings, a second tax return, an accountant and a reasonable-salary requirement you have to defend, so the election only makes sense once the saving clearly beats those costs.

Are business expenses worth the tracking effort? Very. Every deductible dollar removes about 14 cents of self-employment tax before income tax is considered at all. A $3,000 claim for a laptop and home office is worth roughly $424 in self-employment tax on its own.

What if the business made a loss? No self-employment tax, because there are no net earnings to charge. The loss may offset other income for income tax purposes, but it will not refund Social Security tax you never paid in.