Self-Employment Tax
Self-employment tax is the combined Social Security (12.4%) and Medicare (2.9%) tax that self-employed individuals pay on net earnings from self-employment, totaling 15.3%.
Exam Tip
Rate: 15.3% (12.4% SS + 2.9% Medicare). Applied to 92.35% of net SE income. SS wage base: $176,100 (2025). Additional 0.9% Medicare on income over $200K ($250K MFJ). Deduct 50% of SE tax on Form 1040.
What is Self-Employment Tax?
Self-employed individuals must pay both the employer and employee portions of Social Security and Medicare taxes. This combined tax is reported on Schedule SE attached to Form 1040.
Tax Rates (2025)
| Component | Rate | Wage Base |
|---|---|---|
| Social Security | 12.4% | $176,100 |
| Medicare | 2.9% | No limit |
| Total | 15.3% | -- |
| Additional Medicare | 0.9% | Over $200K ($250K MFJ) |
Calculation Steps
- Calculate net SE income (Schedule C profit)
- Multiply by 92.35% (0.9235) to get taxable SE income
- Apply 15.3% rate (12.4% SS + 2.9% Medicare)
- Deduct 50% of SE tax on Form 1040 (above-the-line)
Exam Alert
Rate: 15.3% applied to 92.35% of net SE income. SS wage base: $176,100 (2025). Additional 0.9% Medicare on income over $200K single / $250K MFJ. The 50% deduction of SE tax is an above-the-line deduction (reduces AGI, not SE tax itself).
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