Estimate your Social Security and Medicare taxes based on your net earnings.
Your total income minus business expenses.
2023
2024
Select the relevant tax year for current rates.
Your Estimated Self Employment Tax Summary
Estimated Social Security Tax:—
Estimated Medicare Tax:—
Total Estimated Self Employment Tax:—
Deductible Portion of SE Tax:—
—
Self-employment tax is calculated on 92.35% of your net earnings. The Social Security tax rate is 12.4% (up to the annual limit) and the Medicare tax rate is 2.9% (no limit). Half of the total self-employment tax paid is deductible for income tax purposes.
Tax Breakdown Chart
Social Security Tax | Medicare Tax
What is the Self Employment Tax?
The self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. As a self-employed individual, you are responsible for paying both the employee and employer portions of these taxes. This means you pay the full 15.3% (12.4% for Social Security up to an annual limit, and 2.9% for Medicare with no limit) that would otherwise be split between you and your employer.
Who should use this free self employment tax calculator?
Anyone who is self-employed, including freelancers, independent contractors, gig workers, sole proprietors, and partners in a partnership, should use this calculator. If you receive a Form 1099-NEC or 1099-MISC reporting income for services performed as an independent contractor, or if you operate your own business as a sole proprietor or partner, you are likely subject to self-employment tax. This calculator helps you estimate your tax liability and understand the deductible portion, which can impact your overall income tax.
Common Misconceptions about Self Employment Tax:
Misconception: Self-employment tax is an additional tax on top of income tax. Reality: It's a separate tax specifically for Social Security and Medicare, calculated on your net earnings from self-employment.
Misconception: You only pay self-employment tax if your income is very high. Reality: You generally owe self-employment tax if your net earnings from self-employment are $400 or more.
Misconception: The entire self-employment tax is deductible. Reality: Only one-half of your self-employment tax is deductible as an adjustment to income on your federal tax return.
Self Employment Tax Formula and Mathematical Explanation
Understanding the calculation behind the self employment tax is crucial for accurate estimation. The process involves several steps:
Calculate Net Earnings: First, determine your net earnings from self-employment. This is your gross income from your business minus your allowable business expenses.
Calculate Taxable Base: Self-employment tax is not calculated on 100% of your net earnings. Instead, it's calculated on 92.35% of your net earnings. This accounts for the fact that you are paying both the employee and employer portions of the tax, and the IRS allows a deduction for the employer's share.
Apply Tax Rates: The calculated taxable base is then subject to the Social Security and Medicare tax rates.
The Formula:
Taxable Base = Net Earnings from Self-Employment * 0.9235
Social Security Tax = MIN(Taxable Base, Social Security Wage Base Limit) * 0.124
Medicare Tax = Taxable Base * 0.029
Total Self Employment Tax = Social Security Tax + Medicare Tax
Deductible Portion of SE Tax = Total Self Employment Tax / 2
Variable Explanations
Here's a breakdown of the variables used in the calculation:
Self Employment Tax Variables
Variable
Meaning
Unit
Typical Range (2023/2024)
Net Earnings from Self-Employment
Gross income from self-employment activities less deductible business expenses.
Currency ($)
$0 – $1,000,000+
Taxable Base
The portion of net earnings subject to SE tax (92.35% of net earnings).
Currency ($)
$0 – $1,000,000+
Social Security Wage Base Limit
The maximum earnings subject to Social Security tax.
Currency ($)
$160,200 (2023), $168,600 (2024)
Social Security Tax Rate
The rate applied to earnings up to the SS wage base limit.
Percentage (%)
12.4%
Medicare Tax Rate
The rate applied to all net earnings.
Percentage (%)
2.9%
Total Self Employment Tax
The sum of Social Security and Medicare taxes.
Currency ($)
$0 – $20,000+
Deductible Portion of SE Tax
Half of the total SE tax, deductible for income tax purposes.
Currency ($)
$0 – $10,000+
Practical Examples (Real-World Use Cases)
Let's illustrate the calculation with practical examples:
Example 1: Freelance Graphic Designer
Sarah is a freelance graphic designer. In 2023, she had total earnings of $60,000 and $5,000 in business expenses. Her net earnings are $55,000.
Net Earnings: $55,000
Taxable Base: $55,000 * 0.9235 = $50,792.50
Social Security Tax: $50,792.50 * 0.124 = $6,298.27 (Below the 2023 limit of $160,200)
Medicare Tax: $50,792.50 * 0.029 = $1,472.98
Total SE Tax: $6,298.27 + $1,472.98 = $7,771.25
Deductible Portion: $7,771.25 / 2 = $3,885.63
Sarah's estimated self-employment tax is $7,771.25. She can deduct $3,885.63 from her taxable income, reducing her overall income tax liability.
Example 2: Small Business Owner
John owns a small online retail business as a sole proprietor. In 2024, his business generated $120,000 in revenue, and he had $25,000 in operating expenses. His net earnings are $95,000.
Net Earnings: $95,000
Taxable Base: $95,000 * 0.9235 = $87,732.50
Social Security Tax: $87,732.50 * 0.124 = $10,878.83 (Below the 2024 limit of $168,600)
Medicare Tax: $87,732.50 * 0.029 = $2,544.24
Total SE Tax: $10,878.83 + $2,544.24 = $13,423.07
Deductible Portion: $13,423.07 / 2 = $6,711.54
John's estimated self-employment tax for 2024 is $13,423.07. He can deduct $6,711.54 when calculating his adjusted gross income.
How to Use This Free Self Employment Tax Calculator
Our free self employment tax calculator is designed for simplicity and accuracy. Follow these steps to get your estimated tax figures:
Enter Net Earnings: In the "Net Earnings from Self-Employment" field, input your total business income minus your deductible business expenses. This is the profit your business generated.
Select Tax Year: Choose the relevant tax year from the dropdown menu. Tax rates and limits can change annually, so selecting the correct year ensures accuracy.
Calculate: Click the "Calculate Taxes" button. The calculator will instantly process your inputs based on the current tax laws for the selected year.
How to Read Results:
Estimated Social Security Tax: This is your estimated tax for Social Security benefits, capped by the annual wage base limit.
Estimated Medicare Tax: This is your estimated tax for Medicare benefits, which has no income limit.
Total Estimated Self Employment Tax: The sum of your Social Security and Medicare tax obligations.
Deductible Portion of SE Tax: This is half of your total self-employment tax. You can deduct this amount on your income tax return, which lowers your taxable income.
Primary Highlighted Result: This prominently displays your Total Estimated Self Employment Tax for quick reference.
Decision-Making Guidance:
Use these estimates to budget effectively for your tax obligations. Remember to set aside funds throughout the year to avoid a large tax bill. The deductible portion can significantly reduce your overall income tax, so ensure you claim it correctly on your tax return. Consider consulting a tax professional for personalized advice, especially if your financial situation is complex.
Key Factors That Affect Self Employment Tax Results
Several factors influence the amount of self-employment tax you owe. Understanding these can help you plan better:
Net Earnings: This is the most significant factor. Higher net earnings directly translate to higher self-employment taxes, as the tax is a percentage of your profits. Careful expense tracking is vital to accurately determine net earnings.
Business Expenses: Deductible business expenses reduce your net earnings, thereby lowering your taxable base for self-employment tax. Maximizing legitimate deductions is key to reducing your tax burden.
Social Security Wage Base Limit: For Social Security tax, earnings above this annual limit are not taxed. If your net earnings exceed this limit, your Social Security tax will be capped, while Medicare tax continues to apply to all earnings. This limit changes yearly.
Tax Year: Tax rates and wage base limits are subject to change. Using the correct tax year ensures your calculation reflects the applicable rules. For instance, the Social Security wage base increased from $160,200 in 2023 to $168,600 in 2024.
Deductibility of SE Tax: Remember that only half of your self-employment tax is deductible. This deduction reduces your Adjusted Gross Income (AGI), which can also impact other tax credits or deductions that are AGI-dependent.
State and Local Taxes: While this calculator focuses on federal self-employment tax, many states and localities also impose income or business taxes. These are separate obligations and should be factored into your overall financial planning.
Retirement Contributions: Contributions to self-employed retirement plans (like SEP IRAs or Solo 401(k)s) can reduce your net earnings, thus lowering your self-employment tax liability.
Frequently Asked Questions (FAQ)
What is the difference between self-employment tax and income tax?
Self-employment tax covers Social Security and Medicare contributions for individuals working for themselves. Income tax is levied on your overall taxable income, including profits from your business after deductions. You pay both.
Do I have to pay self-employment tax if I also have a W-2 job?
Yes, if you have net earnings of $400 or more from self-employment, you must pay self-employment tax on that income, regardless of your W-2 earnings. However, the Social Security portion of your self-employment tax is subject to the annual wage base limit, which also applies to your W-2 wages. If your combined W-2 wages and self-employment income exceed the limit, you might not owe Social Security tax on all your self-employment income.
When are estimated taxes due for self-employed individuals?
Self-employed individuals typically need to pay estimated taxes quarterly throughout the year. The deadlines are usually April 15, June 15, September 15, and January 15 of the following year. If a deadline falls on a weekend or holiday, it shifts to the next business day.
Can I deduct my health insurance premiums as a self-employed person?
Yes, you can generally deduct premiums you pay for health, dental, and long-term care insurance for yourself, your spouse, and your dependents if you are self-employed and not eligible to participate in an employer-sponsored health plan. This deduction is taken as an adjustment to income, reducing your AGI, and is separate from the self-employment tax deduction.
What happens if I don't pay my self-employment taxes?
Failure to pay self-employment taxes can result in penalties and interest charges from the IRS. It's crucial to file and pay on time. If you cannot pay the full amount, contact the IRS to discuss payment options like an installment agreement.
How does self-employment tax affect my Social Security benefits?
Paying self-employment tax earns you credits toward Social Security benefits. You need 40 credits (earned over approximately 10 years of work) to qualify for retirement benefits. The amount you pay influences your future benefit calculation, though the primary driver is your lifetime earnings history.
Is the 92.35% calculation always used?
Yes, the 92.35% factor is the standard IRS method for determining the portion of your net earnings subject to self-employment tax. This factor is derived from the combined employee and employer tax rates.
Can I use this calculator for state self-employment taxes?
This calculator is designed for federal self-employment taxes only. Some states have their own versions of self-employment or business taxes. You will need to consult your state's tax authority for specific information regarding state-level obligations.
Related Tools and Internal Resources
Income Tax CalculatorEstimate your federal income tax liability based on various income sources and deductions.