How self-employment tax is calculated (Schedule SE style)

Self-employment tax is the “you pay both sides” version of payroll taxes. If you’re a W-2 employee, your paycheck has Social Security and Medicare taken out, and your employer matches it. When you’re self-employed, there’s no employer — so the self-employment tax covers both halves.

For most people, the flow looks like this:

• Step 1 — Start with net profit. This is usually your Schedule C profit after ordinary and necessary business expenses.
• Step 2 — Convert to net earnings. Schedule SE commonly applies a factor (often 0.9235) so you’re not paying SE tax on the employer-equivalent share.
• Step 3 — Apply Social Security tax. The Social Security portion is 12.4%, but only up to the Social Security wage base. If you also have W-2 wages, those wages “use up” part of the cap first.
• Step 4 — Apply Medicare tax. The Medicare portion is 2.9% with no wage base cap.
• Step 5 — Add Additional Medicare (if applicable). Above certain thresholds, an extra 0.9% may apply to earnings above the reduced threshold.
• Step 6 — Estimate the half SE tax deduction. Many filers can deduct half of the SE tax on the income tax side (this does not reduce the SE tax itself, but can reduce taxable income).

• Net earnings = Net profit × Net earnings factor
• Remaining SS wage base = max(0, Wage base − W-2 wages)
• SS taxable earnings = min(Net earnings, Remaining SS wage base)
• Social Security tax = SS taxable earnings × 12.4%
• Medicare tax = Net earnings × 2.9%
• Additional Medicare tax = max(0, Net earnings − max(0, Threshold − W-2 wages)) × 0.9%
• Total SE tax = SS tax + Medicare tax + Additional Medicare tax
• Half SE tax deduction = Total SE tax ÷ 2

Why does the calculator ask for W-2 wages? Because Social Security tax has a yearly cap. If a day job already used up most (or all) of your wage base, your self-employment income may owe less Social Security tax — but still owes Medicare.

Examples (so you can sanity-check your result)

These examples show how the cap and the factor change the math. Your exact situation may differ, but the pattern is consistent.

Suppose you have $85,000 net profit, no W-2 wages, tax year 2025 wage base $176,100, and the default factor 0.9235.

• Net earnings = 85,000 × 0.9235 = 78,497.50
• SS taxable = 78,497.50 (below wage base) → SS tax ≈ 9,733.69
• Medicare tax = 78,497.50 × 2.9% ≈ 2,276.43
• Additional Medicare = 0 (below thresholds)
• Total SE tax ≈ 12,010.12
• Half SE deduction ≈ 6,005.06

You have $30,000 net profit from freelancing and $160,000 W-2 wages. The wage base room is only 176,100 − 160,000 = 16,100.

• Net earnings = 30,000 × 0.9235 = 27,705
• SS taxable = min(27,705, 16,100) = 16,100 → SS tax ≈ 1,996.40
• Medicare tax = 27,705 × 2.9% ≈ 803.45
• Total SE tax ≈ 2,799.85 (+ any Additional Medicare if above thresholds)

If you’re single and your W-2 wages already exceed the threshold, the remaining threshold for self-employment income can be zero. That means additional Medicare may apply to most/all of your net earnings.

If your situation is high-income and mixed (wages + self-employment), use this calculator as a fast estimator — then double-check on Form 8959 when filing.

What this calculator assumes (and what it doesn’t)

This estimator is designed to be useful for most freelancers, creators, consultants, and small business owners who file a standard return. Here’s what it does and does not include:

• Schedule SE style net earnings factor (editable).
• Social Security wage base cap with W-2 wage reduction.
• Medicare tax with no cap.
• Additional Medicare estimate using filing status thresholds + wage reduction logic.
• Half SE tax deduction estimate.

• Income tax (federal/state) — use a tax bracket or effective tax rate tool for that.
• Special situations (some clergy rules, multiple SE businesses with special adjustments, farm optional methods, etc.).
• Qualified business income (QBI) deduction and other income tax deductions/credits.

Think of SE tax as one layer. Your total tax picture = SE tax + income tax − credits. This tool nails the SE layer quickly.

Frequently asked questions

• Is self-employment tax the same as income tax?

  No. Self-employment tax is primarily Social Security + Medicare payroll taxes. Income tax is a separate calculation based on taxable income and your tax brackets.

• Why does the calculator multiply by 0.9235?

  Schedule SE commonly treats only 92.35% of net profit as “net earnings” subject to SE tax. This approximates removing the employer-equivalent portion so you’re not taxed on the part that would have been the employer share. You can edit the factor if your situation uses a different method.

• Do I pay self-employment tax on every dollar?

  Medicare has no cap, so it applies to all net earnings. Social Security is capped by the yearly wage base, and if you have W-2 wages those wages can reduce how much of your self-employment earnings are subject to Social Security tax.

• What’s the “half self-employment tax deduction”?

  Many filers can deduct half of the SE tax on the income tax side (an above-the-line adjustment). This doesn’t reduce the SE tax itself — but it can reduce taxable income and therefore income tax.

• Does this include quarterly estimated tax payments?

  No — quarterly payments are a payment schedule, not a separate tax. But you can use this estimate to plan how much to set aside for SE tax and then add your income tax estimate for a simple quarterly budget.

• Can I use this if I have an LLC or S-Corp?

  For a single-member LLC taxed as a sole proprietor, this is often still relevant. For S-Corps, payroll taxes work differently because you pay yourself wages. If you’re an S-Corp owner, consult a pro and treat this calculator as a rough directional estimate only.