Self-employment tax
Enter your net business profit (income after expenses) for the year.
Self-employment tax is the part of your bill that surprises most freelancers. The calculator above estimates it; here is exactly how it works and how to pay less of it legally.
How self-employment tax is calculated
It applies to 92.35% of your net business profit, taxed at 15.3% in total:
- 12.4% for Social Security, up to the annual wage base
- 2.9% for Medicare, with no cap (plus an extra 0.9% at higher incomes)
- You can deduct roughly half of the tax against your income tax
Crucially, this is separate from and on top of regular federal and state income tax.
How to legally reduce it
The most common lever is an S-corp election: you pay yourself a reasonable salary (subject to payroll tax) and take remaining profit as distributions, which are not subject to self-employment tax.
- It pays off above a certain profit level, once payroll and filing costs are counted.
- Maximizing legitimate business deductions lowers the profit base the tax is calculated on.
- The salary must be defensible — too low invites IRS reclassification.
Related tools & guides
Keep going: S-corp savings calculator · Reasonable S-corp salary guide · US tax filing service.
Frequently asked questions
What is the self-employment tax rate?
15.3% on 92.35% of your net profit — 12.4% for Social Security (up to the annual wage base) and 2.9% for Medicare, with an additional 0.9% Medicare surtax at higher incomes.
Is self-employment tax on top of income tax?
Yes. Self-employment tax covers Social Security and Medicare and is separate from, and in addition to, federal and state income tax.
Can I deduct any of my self-employment tax?
Yes — you can deduct roughly half of your self-employment tax against your income tax, which reduces your overall bill.
How can I pay less self-employment tax?
An S-corp election is the most common route: a reasonable salary is taxed for payroll, while distributions are not subject to self-employment tax. It pays off above a certain profit level.
Paying too much self-employment tax?
See if an S-corp election fits, and get it set up and filed by a CPA & EA team.
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