Skip to main content
Find a Lawyer
Please enter a legal issue and/or a location
Begin typing to search, use arrow keys to navigate, use enter to select

Self-Employment Tax

Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.

You figure your SE tax yourself using Schedule SE (Form 1040), while the Social Security and Medicare taxes of most wage earners are figured by their employers. Also, you can deduct half of your SE tax in figuring your adjusted gross income. Wage earners, on the other hand, cannot deduct Social Security and Medicare taxes. Read on to learn more about how self-employed workers are taxed.

Are You Self-Employed?

You are self-employed if any of the following apply to you:

  1. You carry on a trade or business as a sole proprietor or an independent contractor.
  2. You are a member of a partnership that carries on a trade or business.
  3. You are otherwise in business for yourself.

Who Must Pay Self-Employment Tax?

You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies:

  1. Your net earnings from self-employment were $400 or more.
  2. You had church employee income of $108.28 or more.

Your net earnings from self-employment are based on your earnings subject to SE tax. Most earnings from self-employment are subject to SE tax. Some earnings from employment (certain earnings that are not subject to social security and Medicare taxes) are subject to SE tax.

If you have earnings subject to SE tax, use Schedule SE to figure your net earnings form self-employment. Before you figure your net earnings, you generally need to figure your total earnings subject to SE tax.

What is the Self-Employment Tax Rate?

The self-employment tax rate is currently 15.3 percent. The rate consists of two parts: 12.4 percent for social security (old-age, survivors, and disability insurance) and 2.9 percent for Medicare (hospital insurance). Only the first $87,000 of your combined wages, tips, and net earnings is subject to any combination of the 12.4 percent social security part of SE tax, social security tax, or railroad retirement (tier 1) tax.

All your combined wages, tips, and net earnings in 2003 are subject to any combination of the 2.9 percent Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax.

Self-Employment Tax Deduction

You can deduct half of your SE tax in figuring your adjusted gross income. This deduction only affects your income tax. It does not affect either your net earnings from self-employment or your SE tax.

How to Pay Self-Employment Tax

To pay SE tax, you must have a social security number (SSN) or an individual taxpayer identification number (ITIN).

Social Security Administration (SSA) Time Limit for Posting Self-Employment Income

Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. The SSA will not change its records to increase your self-employment income. 

Get Legal Help with Your Self-Employment Tax Questions

You're a busy, self-employed small business owner and payroll taxes can be complicated, stressful, and time-consuming. Not to mention the many laws and rules you must comply with throughout the year. Don't take a risk with your business and investments. Get help today by talking to a local tax attorney about your business's tax obligations.

Was this helpful?

You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help

Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.

Or contact an attorney near you:

Next Steps

Contact a qualified business attorney to help you navigate your business's taxes.

Begin typing to search, use arrow keys to navigate, use enter to select

FindLaw will earn a commission if you purchase business formation products through these affiliate links.

Meet FindLaw's trusted partner LegalZoom, an industry leader in online business formations

Kickstart your LLC in minutes!

Join the millions who launched their businesses with LegalZoom.

LLC plans start at $0 + state fees.

Prefer to work with a lawyer?

Find one right now.

Copied to clipboard

Find a Lawyer

More Options