Freelancers, gig workers, and small business owners are responsible for paying the full share of Social Security and Medicare taxes, known collectively as the self-employment tax. If you’re self-employed, you’ll need to calculate and pay this 15.3% tax in addition to your income tax. This guide explains how to use a self-employment tax calculator and breaks down how the tax is computed for 2025.
🧾 What Is Self-Employment Tax?
Self-employment (SE) tax is the equivalent of FICA taxes for employees. It funds Social Security and Medicare programs. Since self-employed individuals don’t have an employer to cover half of this cost, they pay both the employer and employee portions:
- Social Security tax: 12.4%
- Medicare tax: 2.9%
Total self-employment tax = 15.3% on net earnings up to the Social Security wage base.
📅 Self-Employment Tax Rates for 2025
- Social Security wage base limit: $168,600 (subject to adjustment by the SSA)
- Medicare tax: No income cap
- Additional Medicare tax: 0.9% on income above $200,000 (single) / $250,000 (married jointly)
📉 How to Calculate Self-Employment Tax
The SE tax is based on net earnings from self-employment, not gross income. Here’s the basic calculation:
- Start with your net income (revenue minus expenses)
- Multiply by 92.35% to calculate SE tax base (this accounts for the employer-equivalent portion)
- Apply the 15.3% SE tax rate to that amount
🧮 Example:
- Net income: $60,000
- SE tax base = $60,000 × 92.35% = $55,410
- SE tax = $55,410 × 15.3% = $8,475.73
- You can deduct half of SE tax ($4,238) as an above-the-line deduction on Form 1040
💻 Self-Employment Tax Calculator Tool
You can use a self-employment tax calculator online or build a simple estimate using spreadsheet software. Most tax filing software and the IRS worksheets also walk you through the math.
Key Inputs Required:
- Total net income from Schedule C or Schedule F
- Estimated expenses and deductions
- Filing status and other income (for Medicare surcharge)
→ IRS Self-Employment Tax Page
📄 Where to Report SE Tax
- Schedule SE (Form 1040): Computes your self-employment tax
- Schedule C: Reports income and expenses from business
- Form 1040: Deducts half of your SE tax on Line 15
📌 Additional Medicare Tax (High-Income Filers)
There is a 0.9% Additional Medicare Tax on earned income above certain thresholds:
- $200,000 – Single
- $250,000 – Married Filing Jointly
- $125,000 – Married Filing Separately
This tax applies in addition to the standard 2.9% Medicare tax.
💡 Tax Planning Tips for the Self-Employed
- Set aside at least 25–30% of your net income for SE and income tax
- Pay quarterly estimated taxes to avoid penalties
- Keep detailed records of income and business expenses
- Use retirement plans like SEP IRA or Solo 401(k) to reduce taxable income
- Track business mileage, home office use, and equipment purchases
📅 Quarterly Estimated Tax Deadlines for 2025
- Q1 – April 15, 2025
- Q2 – June 16, 2025
- Q3 – September 15, 2025
- Q4 – January 15, 2026
🔍 People Also Ask (FAQs)
Q: Do I pay SE tax if I have a side gig?
A: Yes. If you earn $400 or more in net self-employment income, you must file Schedule SE and pay SE tax.
Q: Can I deduct the self-employment tax?
A: You can deduct 50% of your SE tax on Form 1040 as an adjustment to income. This does not affect the actual tax owed.
Q: How do I pay self-employment tax?
A: You pay SE tax through your federal tax return, but should make quarterly estimated payments throughout the year via IRS Direct Pay or EFTPS.
Q: Is SE tax separate from income tax?
A: Yes. SE tax covers Social Security and Medicare, while income tax applies to your taxable income. Both are owed unless your net income is extremely low.
📘 Final Thoughts
Understanding your self-employment tax is crucial to avoiding surprises and maintaining compliance with the IRS. Whether you use a tax calculator or file manually with Schedule SE, accurate recordkeeping and proactive planning will help you reduce liabilities and take advantage of deductions.
Pro Tip: Consider hiring a tax advisor if your income fluctuates or if you’re eligible for self-employed retirement or healthcare deductions.
