What is self-employment tax?

Self-employment tax (definition)

Self-employment tax is the name given to Social Security and Medicare taxes when paid by a self-employed person. For employees, the employer shares the cost of these two taxes with the employee. But self-employed workers have to pay both shares.

If your net earnings as a self-employed person are $400 or more during the tax year, you have to pay self-employment tax. The employer half of the self-employment tax is a tax-deductible expense that you can claim separately on your income tax.

Self-employment tax rate breakdown

A stacked bar chart showing the self-employment tax rate of 15.3% made up of  Social Security rate of 12.4% and Medicare rate of 2.9%

The self-employment tax rate is 15.3%.

What tax forms to use for self-employment tax

Schedule C of the IRS Form 1040 is used to report self-employed business income or loss. Self-employment tax is calculated on Schedule SE of the same form. The tax is paid quarterly using Form 1040-ES if the estimated liability exceeds $1000.

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Tax deductions

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