Self-Employment Tax: What the 15.3% Really Covers (2025)

Why the self-employed pay an extra tax

When you work for an employer, the company quietly pays half of your Social Security and Medicare taxes and withholds the other half from your paycheck. When you work for yourself, you are both employer and employee — so you owe the whole thing. That is self-employment (SE) tax, described by the IRS — Self-Employment Tax (Social Security and Medicare Taxes).

The 15.3% rate, broken down

SE tax is 15.3%: 12.4% for Social Security plus 2.9% for Medicare. Crucially, the 12.4% Social Security portion applies only up to an annual wage base — $176,100 for 2025 — while the 2.9% Medicare portion has no ceiling. High earners also pay an extra 0.9% Additional Medicare Tax above certain thresholds. The current rates are confirmed in IRS Topic No. 751, Social Security and Medicare Withholding Rates.

The deduction that softens the blow

You can deduct one-half of your SE tax as an adjustment to income on Form 1040. It does not reduce the SE tax itself, but it lowers your income-tax bill and applies whether or not you itemize. SE tax is also calculated on 92.35% of your net self-employment earnings, not the full amount.

Who owes it, and when

You generally owe SE tax if your net earnings from self-employment are $400 or more in a year. Because no employer withholds for you, you typically pay it through quarterly estimated payments rather than a single April bill. See our related guide to estimated taxes and the IRS — Estimated Taxes.

Cutting the bill legitimately

Every ordinary and necessary business deduction lowers your net earnings, which lowers both income tax and SE tax. Retirement plans for the self-employed (SEP-IRA, Solo 401(k)) can shelter significant income. An S-corporation election can, in some cases, reduce SE tax — but only with genuine reasonable salary and added compliance, so weigh it with a professional.