Self-employment tax and quarterly estimated payments

An employee and their employer each pay 7.65% in payroll taxes — 6.2% Social Security and 1.45% Medicare. When you work for yourself, you are both parties, so you pay both halves: 15.3% in total. That is self-employment tax, reported on Schedule SE and owed in addition to income tax.

It applies to net earnings from freelancing, consulting, contracting, sole proprietorships, single-member LLCs and partnership income — anything reported on Schedule C or a K-1 with self-employment earnings. It does not apply to W-2 wages (already withheld), interest, dividends, capital gains, or most rental income.

1. Start with net earnings — business income minus business expenses, not gross receipts.
2. Multiply by 92.35%. This removes an amount equivalent to the employer half, so a self-employed person is treated comparably to an employee whose employer-side contribution never appears in their wages.
3. Apply 12.4% Social Securityup to the year's wage base, counting any W-2 wages you also earned against that same cap.
4. Apply 2.9% Medicare to the whole amount — no ceiling.
5. Add 0.9% Additional Medicare Tax on earnings above $200,000 single or $250,000 married filing jointly ($125,000 married filing separately).
6. Deduct half the total as an above-the-line adjustment when computing income tax.

The wage base is why self-employment tax is not simply 15.3% of everything: past the cap, the marginal rate on additional self-employment income drops to 2.9% (or 3.8% once the Additional Medicare Tax applies).

A consultant with $120,000 of net earnings in 2025, no W-2 wages:

• Net earnings subject to SE tax: $120,000 × 92.35% = $110,820
• Social Security: $110,820 × 12.4% = $13,742 (below the $176,100 base, so all of it)
• Medicare: $110,820 × 2.9% = $3,214
• Total self-employment tax: $16,955
• Deductible half: $8,478, subtracted before computing income tax

That $16,955 is owed on top ofincome tax, and both are paid through the same quarterly estimated payments. Underestimating this is the most common reason a first-year freelancer's April bill is roughly twice what they budgeted for.

Self-employment tax has no separate deadline or form. It is folded into your quarterly estimated payments along with income tax, on the same four dates listed in the due dates guide.

A rough working rule for a full-time freelancer is to set aside 25–30% of net earnings for federal tax, more at higher incomes and more again if your state taxes income. But the figure varies enormously with filing status, deductions and other income — the calculator computes self-employment tax alongside income tax for your actual situation.

Freelance income rarely arrives in four equal pieces. A quarter with no invoices still attracts an estimated tax deadline, and the IRS default assumes you earned a quarter of the year's income in it. Annualizing with Form 2210 Schedule AI recalculates each installment from what you had actually been paid by that date — see the Schedule AI guide.