What Is Self-Employment Tax?
Self-employment (SE) tax is the Social Security and Medicare tax that self-employed people pay. When you work for an employer, you split FICA taxes 50/50 — you pay 7.65% and your employer pays 7.65%. When you're self-employed, you pay both halves: 15.3% total.
This is in addition to federal and state income tax. It's the single biggest surprise for new freelancers, and it's why your first tax bill as a 1099 worker can be shockingly high.
How SE Tax Is Calculated
| Component | Rate | Applies To |
|---|---|---|
| Social Security | 12.4% | First $176,100 of net SE income |
| Medicare | 2.9% | All net SE income |
| Additional Medicare | 0.9% | SE income above $200,000 ($250K MFJ) |
But there's an important nuance: SE tax applies to 92.35% of net earnings, not 100%. This 7.65% reduction mirrors the fact that employees don't pay FICA on their employer's share. And you can deduct half of your SE tax from your gross income, reducing your income tax.
Social Security: $73,880 × 12.4% = $9,161
Medicare: $73,880 × 2.9% = $2,142
Total SE tax: $11,303
Deductible half: $5,652 (reduces your AGI)
Income tax (after SE deduction + standard deduction):
AGI: $80,000 − $5,652 = $74,348
Taxable: $74,348 − $15,000 = $59,348
Federal tax: ~$8,060
Total tax bill: $11,303 + $8,060 = $19,363 (24.2% effective rate)
Calculate your exact SE tax with deductions and income tax combined.
Open SE Tax Calculator →Quarterly Estimated Tax Payments
Unlike W-2 employees who have taxes withheld each paycheck, freelancers must pay taxes quarterly. If you expect to owe $1,000 or more, the IRS requires quarterly payments or you'll face underpayment penalties.
| Quarter | Period | Due Date |
|---|---|---|
| Q1 | Jan 1 – Mar 31 | April 15 |
| Q2 | Apr 1 – May 31 | June 16 |
| Q3 | Jun 1 – Aug 31 | September 15 |
| Q4 | Sep 1 – Dec 31 | January 15 (next year) |
Safe harbor rule: You avoid penalties if you pay at least 90% of this year's tax, or 100% of last year's tax (110% if AGI was over $150K). When in doubt, pay 100% of last year's amount divided by 4.
Calculate your quarterly payment amount with safe harbor guidance.
Open Quarterly Tax Calculator →Deductions That Reduce Your SE Tax Bill
As a self-employed person, you can deduct legitimate business expenses from your gross income before SE tax and income tax are calculated. Common deductions include:
- Home office: Simplified method ($5/sq ft, up to 300 sq ft = $1,500) or actual expenses
- Health insurance premiums: 100% deductible if you're self-employed and not eligible for employer coverage
- Equipment and software: Computers, phones, subscriptions, tools of your trade
- Vehicle expenses: Business mileage at $0.70/mile (2025) or actual vehicle costs
- Professional services: Accountant, lawyer, business insurance
- Retirement contributions: SEP-IRA (up to 25% of net income) or Solo 401(k) (up to $23,500 + 25%)
1099 vs W-2: What Freelancers Need to Know
The total tax burden difference between 1099 and W-2 income is about 7.65% — the employer's share of FICA that you now pay yourself. But the gap narrows when you factor in business deductions that W-2 employees can't take.
As a rule of thumb: to take home the same amount as a W-2 employee, your 1099 rate needs to be 25–40% higher than the equivalent salary, accounting for SE tax, lack of benefits, and no paid time off.
See the exact equivalent rate for any W-2 salary.
Open 1099 vs W-2 Calculator →