Self-Employment Tax

How It Works

Self-employment tax is the self-employed person's equivalent of FICA payroll taxes. When you work for an employer, you each pay half of the Social Security and Medicare taxes (7.65% each). When you're self-employed, you pay both halves, 15.3% total, on your net self-employment earnings. The tax consists of 12.4% for Social Security (on net earnings up to $176,100 in 2025) and 2.9% for Medicare (on all net earnings with no cap). An additional 0.9% Medicare tax applies to net earnings above $200,000 for single filers. Net self-employment earnings are calculated by taking your gross self-employment income, subtracting business expenses, and then multiplying by 92.35% (this factor accounts for the employer-equivalent portion and mirrors how employees aren't taxed on their employer's FICA share). On $100,000 of net self-employment income, SE tax is about $14,130. You can deduct half of the self-employment tax ($7,065) as an above-the-line adjustment to AGI, which reduces your income tax but not your SE tax. Self-employment tax is often the largest surprise for new freelancers. Someone earning $75,000 as an employee pays about $5,737 in FICA. The same income as a freelancer generates about $10,597 in SE tax, nearly double. This is why financial advisors recommend freelancers set aside 25-30% of gross income for taxes. S-corporation election can reduce SE tax by splitting income into salary (subject to FICA) and distributions (not subject to FICA), though the salary must be "reasonable."

Self-Employment Tax is one of the tax-code concepts that recurs across TaxCompare. The definition above is the technical answer; below is the practical context for how it shows up in the state-vs-state comparisons that drive the site.

In the tax-comparison engine, this concept feeds either the federal calculation (IRS Revenue Procedures) or the state calculation (Tax Foundation state-tax database). The methodology page describes which inputs flow into each piece of the model.