Self-Employment Tax in 2026: What 1099 Workers Owe
Quick Answer
Self-employed workers owe 15.3% self-employment (SE) tax on net profit: 12.4% for Social Security (up to $168,600 of earnings in 2026) and 2.9% for Medicare (no cap). You can deduct half of SE tax above the line to reduce AGI. For example, $50,000 net profit triggers $7,065 in SE tax. Unlike employees, you owe both halves of FICA.
Understanding Self-Employment Tax
When you're a W-2 employee, your employer withholds 7.65% for FICA (Social Security and Medicare), and the employer contributes another 7.65%. In effect, you split the 15.3% burden.
When you're self-employed, you owe the full 15.3%—you're both employer and employee. This is self-employment tax, and it's separate from income tax. You calculate it on Schedule SE and pay it along with your income tax return.
In 2026, Social Security tax applies to the first $168,600 of net self-employment income. Medicare tax is 2.9% on all net profit (with no cap). High earners pay an additional 0.9% Medicare surtax on earnings above $200,000 (single) or $250,000 (joint).
2026 Self-Employment Tax Rates and Thresholds
| Item | 2026 Rate/Threshold |
|---|---|
| Social Security tax rate | 12.4% |
| Social Security wage base | $168,600 |
| Medicare tax rate | 2.9% |
| Medicare surtax (high earners) | 0.9% (income over $200k single/$250k joint) |
| Total SE tax (below SS cap) | 15.3% |
| Total SE tax (above SS cap) | 2.9% + 0.9% = 3.8% |
Example 1: $60,000 net profit.
- Social Security: $60,000 × 12.4% = $7,440
- Medicare: $60,000 × 2.9% = $1,740
- Total SE tax: $9,180
- Deductible SE tax (50%): $4,590
Example 2: $200,000 net profit (single filer).
- Social Security on first $168,600: $168,600 × 12.4% = $20,906
- Medicare on all $200,000: $200,000 × 2.9% = $5,800
- Additional Medicare surtax on $0 (income under $200k threshold): $0
- Total SE tax: $26,706
- Deductible SE tax (50%): $13,353
Example 3: $250,000 net profit (single filer, triggering Medicare surtax).
- Social Security: $168,600 × 12.4% = $20,906
- Medicare on $250,000: $250,000 × 2.9% = $7,250
- Additional Medicare surtax on $50,000 ($250k – $200k): $50,000 × 0.9% = $450
- Total SE tax: $28,606
- Deductible SE tax (50%): $14,303
Who Must Pay Self-Employment Tax
You must pay SE tax if:
- Net profit from self-employment is $400 or more
- You're a clergy member with $108.28+ net profit from self-employment (lower threshold)
Net profit is your gross business income minus business expenses. If you grossed $75,000 but spent $30,000 on supplies, rent, and equipment, your net profit is $45,000, and SE tax is owed on $45,000, not $75,000.
Employees who also have side gigs should calculate SE tax on side income only. W-2 employment doesn't create SE tax obligation—only self-employment income does.
Calculating Net Profit for SE Tax
Net profit for SE tax purposes differs slightly from your business profit for income tax:
- Start with gross business income.
- Subtract deductible business expenses (office rent, utilities, supplies, depreciation, etc.).
- Add back one-half of SE tax paid (this is deductible above the line).
- Arrive at net profit for SE tax calculation.
You can't deduct the SE tax when calculating the SE tax itself, but you do deduct it once calculated, reducing your adjusted gross income and thus your income tax burden.
Quarterly Estimated Tax Payments
Self-employed workers must pay estimated taxes quarterly or face penalties. Use the /products/quarterly-tax-calculator to estimate your Q1, Q2, Q3, and Q4 payments.
Total estimated tax = (estimated net profit × marginal tax rate) + (estimated SE tax). You must pay at least 90% of current-year tax or 100% of prior-year tax (110% if prior-year income exceeded $150,000) to avoid penalties.
Quarterly due dates (2026):
- Q1: April 15, 2026
- Q2: June 15, 2026
- Q3: September 15, 2026
- Q4: January 18, 2027
Strategies to Reduce SE Tax
Unlike income tax, you can't escape SE tax with deductions—only reduce the net profit it's calculated on. However, strategies include:
- Maximize business deductions: Home office deduction, vehicle expenses, health insurance premiums, retirement plan contributions.
- Retirement contributions: Contribute to a SEP-IRA or Solo 401(k). Contributions reduce both income tax and SE tax. For 2026, you can contribute up to 20% of net self-employment income (after the SE tax deduction) to a SEP-IRA, capped at $69,000.
- S-corp election: If you have substantial self-employment income ($60k+), forming an S-corp and paying yourself a "reasonable salary" (W-2) plus distributions can reduce SE tax. Distributions aren't subject to SE tax, but salary is. This requires balancing income tax vs. SE tax savings.
Use the /products/gig-sep-ira-contribution tool to calculate how much you can shelter in a retirement plan.
SE Tax Paid and Income Tax Withholding
SE tax paid during the year can be deducted above the line (on page 1 of your tax return), reducing AGI. This lowering of AGI also reduces your income tax liability and may help you qualify for income-based credits.
If you owe substantial taxes, consider paying estimated taxes to avoid a large bill at filing. Underpayment penalties are charged quarterly and compound—paying on time is cheaper than paying late.
Special Situations
Spouses in business together: If you file jointly and both are self-employed, calculate SE tax separately for each and combine them.
Farmers and fishermen: These groups can use a simplified SE tax calculation if net profit is under $25,000.
Household employees: If you employ a nanny or housekeeper paying wages of $2,700+ annually (2026 threshold), you owe employer and employee FICA taxes, including SE tax liability for that portion.
Sources
- Internal Revenue Service. "Self-Employment Tax (Social Security and Medicare Taxes)." IRS.gov.
- Internal Revenue Service. "SE Tax Form 1040 Schedule SE." IRS.gov.
- Internal Revenue Service. Publication 334: Tax Guide for Small Business.
- Social Security Administration. "Self-Employment Tax." SSA.gov.
- U.S. Treasury. "2026 FICA Wage Base." Treasury.gov.