If you're a freelancer, independent contractor, or small business owner, you are your own boss—and your own payroll department. A key part of this responsibility is paying your own Social Security and Medicare taxes, collectively known as the Self-Employment (SE) tax. It's the equivalent of the FICA taxes that employers and W-2 employees split. Our SE Tax Calculator helps you estimate this liability so you can plan your quarterly tax payments, understand your deductions, and avoid any surprises when tax season arrives.
How to Use the Self-Employment Tax Calculator
Estimating your SE tax is straightforward. You only need one number to get started:
- Enter Net Earnings: Input your total net earnings from your self-employment activities. This is your gross income from your business minus your ordinary and necessary business expenses.
- Calculate Your Tax: Click the "Calculate SE Tax" button to see a breakdown of your Social Security tax, Medicare tax, total SE tax, and the valuable portion you can deduct on your income tax return.
Understanding Self-Employment Tax
When you work for an employer, you pay a 6.2% Social Security tax and a 1.45% Medicare tax on your wages (a total of 7.65%). Your employer pays a matching 7.65% on your behalf. When you are self-employed, you are responsible for paying both the employee and employer portions, for a combined total of 15.3%.
How Your Taxable SE Income is Calculated
You don't pay the 15.3% on your entire net business profit. To put self-employed individuals on more equal footing with W-2 employees, the IRS allows you to first multiply your net earnings by 92.35% (which is 100% minus the 7.65% employer portion). The result is your taxable self-employment income. This adjustment accounts for the fact that traditional employees don't pay FICA tax on the portion their employer pays.
The 15.3% tax is then split into two parts:
- Social Security: 12.4% on your taxable SE income up to an annual limit ($168,600 for 2024). Once your total combined earnings (from both self-employment and any W-2 jobs) exceed this limit, you stop paying the Social Security portion of SE tax for the rest of the year.
- Medicare: 2.9% on all of your taxable SE income. There is no income limit for the Medicare tax.
The Deduction for SE Tax: An Important Break
Because you are paying both the employee and employer halves of FICA, the IRS allows you to deduct the "employer-equivalent" portion of your SE tax from your gross income when calculating your *income tax*. This means you can deduct one-half of your total SE tax liability (7.65% of your taxable SE income). This is a valuable "above-the-line" deduction, which means you can take it even if you don't itemize. Our calculator automatically shows you the amount of this deduction.
Planning for Your Tax Obligations
Unlike W-2 employees who have taxes withheld from each paycheck, self-employed individuals are responsible for paying their taxes directly to the IRS throughout the year. This is typically done through quarterly estimated tax payments.
It is crucial to set aside a portion of every payment you receive to cover your future tax bill. A common rule of thumb is to set aside 25-30% of your net earnings to cover both your SE tax and your federal and state income taxes. Your total tax liability will vary based on your income level, deductions, and filing status, so it's wise to recalculate your estimated liability periodically throughout the year.
Estimated tax payments are generally due on April 15, June 15, September 15, and January 15 of the following year. Failing to pay enough tax throughout the year can result in an underpayment penalty from the IRS.
Frequently Asked Questions
Do I have to pay SE tax if I have a side hustle?
Yes. If you have net earnings of $400 or more from self-employment, you are generally required to file a tax return and pay SE tax, even if you also have a full-time job where FICA taxes are withheld. Your W-2 job income is combined with your self-employment income to determine if you have reached the Social Security wage base limit.
Does this calculator figure out my income tax?
No, this calculator only computes the self-employment tax (Social Security and Medicare). Your net earnings will also be subject to federal and state income tax. The "Deductible Portion" shown in the results can be used as an above-the-line deduction to lower your adjusted gross income (AGI) when calculating your separate income tax liability.
What is the Qualified Business Income (QBI) Deduction?
The QBI deduction is another important tax break for self-employed individuals. It allows many owners of sole proprietorships, partnerships, and S corporations to deduct up to 20% of their qualified business income. This is a separate deduction from the SE tax deduction and further reduces your overall taxable income.
How do I pay SE tax?
You calculate your SE tax on Schedule SE, "Self-Employment Tax," which you file with your annual Form 1040 tax return. To pay the taxes during the year, most self-employed individuals make estimated tax payments on a quarterly basis using Form 1040-ES, "Estimated Tax for Individuals."