If you earned more than $400 as a 1099 contractor, freelancer, or sole proprietor in 2026, you are required to pay the IRS Self-Employment (SE) tax. Understanding SE tax upfront prevents surprise tax bills in April.
What is the 15.3% Self-Employment Tax?
The self-employment tax rate is 15.3%, which consists of two parts:
- Social Security Tax: 12.4% on earnings up to the annual wage base limit limit.
- Medicare Tax: 2.9% on all net business earnings.
For W-2 employees, employers pay half (7.65%). As a freelancer, you pay both employer and employee portions, but you get to deduct 50% of your SE tax from your gross income on your federal return.
How Net Self-Employment Earnings Are Taxed
The IRS only taxes 92.35% of your total net business profit (gross income minus eligible business expenses).
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