The 2024 self-employment tax rate is 15.3 percent of your net earnings

Self-employment tax covers Social Security and Medicare for people who work for themselves. The rate breaks into two parts: 12.4 percent for Social Security and 2.9 percent for Medicare. You pay both the employer and employee portions, which is why the combined rate is higher than what a W-2 employee sees on a paycheck.

The Social Security portion (12.4 percent) applies only to earnings up to a cap. For 2024, that cap is $168,600. Once your net self-employment income reaches that amount, you stop paying the Social Security tax on additional earnings. Medicare tax (2.9 percent) has no cap, so you pay it on all net self-employment income. If your net self-employment income exceeds $200,000 (or $250,000 if married filing jointly), an additional 0.9 percent Medicare tax applies to the amount over the threshold.

Key Takeaways

  • Self-employment tax for 2024 is 15.3 percent total: 12.4 percent for Social Security (capped at $168,600 in net earnings) and 2.9 percent for Medicare (no cap).
  • You calculate self-employment tax on your net profit, not gross revenue, after subtracting business expenses and the deductible portion of self-employment tax itself.
  • An additional 0.9 percent Medicare tax applies if your net self-employment income exceeds $200,000 for single filers or $250,000 for married couples filing jointly.
  • You report self-employment tax using Schedule SE (Form 1040), and the deductible portion reduces your adjusted gross income on your main tax return.

How to calculate your net self-employment income

Self-employment tax is not calculated on your total business revenue. You start with your net profit—the amount left after you subtract all legitimate business expenses from your gross income. This includes rent, supplies, equipment, vehicle costs, insurance, and wages you pay employees. The lower your net profit, the lower your self-employment tax.

Once you have your net profit, you multiply it by 92.35 percent. This step accounts for the fact that you can deduct half of your self-employment tax as a business expense, which reduces your taxable income. Then you explore the 15.3 percent rate to that adjusted figure. For example, if your net profit is $50,000, you would multiply by 0.9235 to get $46,175, then multiply by 0.153 to find your self-employment tax of roughly $7,065.

The Social Security earnings cap and how it affects you

The Social Security portion of self-employment tax stops once your net earnings hit $168,600 in 2024. This means if you earn $200,000 in net self-employment income, you pay the 12.4 percent Social Security tax only on the first $168,600, not on the full amount. The remaining $31,400 is subject only to the 2.9 percent Medicare tax.

This cap matters most if you have multiple income sources. If you work a W-2 job and also have self-employment income, your employer's payroll deductions count toward the $168,600 cap. You should track both to avoid overpaying. The IRS provides a worksheet on Schedule SE to account for this overlap.

Additional Medicare tax for higher earners

If your net self-employment income pushes your total income above certain thresholds, you owe an extra 0.9 percent Medicare tax. For single filers, the threshold is $200,000. For married couples filing jointly, it is $250,000. For married filing separately, it is $125,000. This additional tax applies only to income above the threshold.

The additional Medicare tax is separate from the standard 2.9 percent Medicare tax and is not subject to the Social Security earnings cap. If you have both W-2 wages and self-employment income, your employer may have already withheld some of this additional tax from your paycheck, so you need to account for that when you file.

Where to report self-employment tax on your return

You report self-employment tax using Schedule SE (Form 1040), which is part of your federal income tax return. Schedule SE has two sections: Short Schedule SE for most self-employed people, and Long Schedule SE for those with farm income or certain other situations. Most people use the short version.

On Schedule SE, you enter your net profit from your business (usually from Schedule C if you are a sole proprietor), calculate your self-employment tax, and determine how much you can deduct. Half of your self-employment tax is deductible and reduces your adjusted gross income on your main Form 1040. This deduction lowers your overall taxable income, which provides some tax relief for the burden of paying both employer and employee portions.

Quarterly estimated tax payments if you owe self-employment tax

If you expect to owe $1,000 or more in federal income tax and self-employment tax combined for the year, you should make quarterly estimated tax payments. These are due on April 15, June 15, September 15, and January 15 of the following year. Paying quarterly helps you avoid a large bill at tax time and may protect you from underpayment penalties.

To calculate your quarterly payment, estimate your annual net self-employment income, explore the 15.3 percent rate, and divide by four. If your income is uneven throughout the year, you can adjust each quarter's payment based on actual earnings. The IRS provides Form 1040-ES to help you calculate these payments.

Self-employment tax for married couples and business partners

If you are married and both self-employed, each spouse reports their own net self-employment income on separate Schedule SE forms and pays tax on their individual earnings. There is no joint self-employment tax calculation. Each person's income is subject to the $168,600 Social Security cap independently.

If you are a partner in a partnership or an LLC taxed as a partnership, the partnership itself does not pay self-employment tax. Instead, the partnership calculates your share of net profit and reports it on a Schedule K-1. You then report that income on your own Schedule SE and pay self-employment tax on your share. S-corporation owners have different rules and may be able to reduce self-employment tax by taking a reasonable salary and a distribution, so consult a tax professional if that applies to you.

Frequently Asked Questions

Do I have to pay self-employment tax if I have a loss?

No. Self-employment tax is calculated only on net profit. If your business expenses exceed your revenue and you have a net loss, you owe no self-employment tax. You still file Schedule SE to report the loss, and you can carry it forward to reduce future years' taxable income.

Can I deduct self-employment tax on my return?

Yes, but only half of it. You calculate the full 15.3 percent tax on Schedule SE, then deduct half of that amount on your Form 1040 as an adjustment to income. This reduces your adjusted gross income but does not reduce the self-employment tax itself.

What if I have both W-2 wages and self-employment income?

Your W-2 wages count toward the $168,600 Social Security cap. If your W-2 employer already withheld Social Security tax up to the cap, you do not pay it again on self-employment income. Schedule SE has a worksheet to calculate this correctly and avoid double-paying.

Is self-employment tax the same as income tax?

No. Self-employment tax funds Social Security and Medicare. Income tax is separate and is calculated on your total taxable income after deductions. You owe both if you are self-employed and earn enough to trigger income tax liability.

What records do I need to support my self-employment tax calculation?

Keep receipts, invoices, and bank statements that document your business income and expenses. The IRS does not require you to attach these to your return, but you must have them available if your return is audited. Records should cover at least three years.