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

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.

See related terms

Handy resources

Advisor directory

You can search for experts in our advisor directory

Find an advisor

How to manage your finances and cash flow

Discover resources to help you do better business

See all our guides & articles

Online accounting with Xero

Automate your accounting in the cloud

Find out more


This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.