United States self-employment tax rates and deduction
United States self-employment tax covers Social Security and Medicare, with a general net earnings threshold and an income-tax deduction for half.
- General net earnings threshold
- $400 or moreIRS, Topic 554 self-employment tax
- Social Security rate
- 12.4%IRS, Topic 554 self-employment tax
- Medicare rate
- 2.9%IRS, Topic 554 self-employment tax
- General portion subject to tax
- 92.35%IRS, Topic 554 self-employment tax
- Deductible share
- One-half of self-employment taxIRS, Topic 554 self-employment tax
Net earnings and threshold
Self-employment tax is usually payable when net earnings from self-employment are $400 or more. Net earnings are calculated by subtracting ordinary and necessary trade or business expenses from gross business income. Generally, the amount subject to self-employment tax is 92.35% of net earnings. IRS, Topic 554 self-employment tax (opens in a new tab).
Social Security and Medicare
The self-employment tax rate consists of 12.4% for Social Security and 2.9% for Medicare. The law sets an annually changing maximum amount of net earnings subject to Social Security tax. All net earnings are subject to Medicare tax. IRS, Topic 554 self-employment tax (opens in a new tab).
Deduction for half
Self-employment tax is computed on Schedule SE. One-half of self-employment tax can be deducted when figuring adjusted gross income on Form 1040, Form 1040-SR or Form 1040-NR; this deduction is calculated on Schedule SE, with Schedule 1 attached. IRS, Topic 554 self-employment tax (opens in a new tab).
Scope
This guide covers general federal self-employment tax rules. It excludes an individual tax calculation, annual Social Security ceilings, Additional Medicare Tax, optional methods and church employee rules. General information only, not personalised tax advice.