Self-Employment Tax for 1099 Workers
The 15.3% tax most new freelancers don't see coming — explained clearly.
By Reba Donaldson · Last reviewed: April 2026
What is self-employment tax?
Self-employment tax is the Social Security and Medicare tax paid by people who work for themselves. When you're a W-2 employee, your employer pays half (7.65%) and withholds the other half from your paycheck. When you earn 1099 income, you pay both halves — the full 15.3%.
The breakdown: 12.4% for Social Security (on the first $176,100 of net SE income in 2026) and 2.9% for Medicare (no income cap). High earners also pay a 0.9% Additional Medicare Tax on SE income over $200,000 (single) or $250,000 (married filing jointly).
How SE tax is calculated
SE tax is calculated on 92.35% of your net self-employment income — not the full 100%. This adjustment approximates the employer share that a W-2 employee's employer would otherwise pay.
$70,000 × 92.35% = $64,645 (taxable SE income)
$64,645 × 15.3% = $9,891 self-employment tax
The deduction that softens the blow
You can deduct half of your SE tax from your gross income — an above-the-line deduction you don't need to itemize to claim. In the example above: $9,891 ÷ 2 = $4,946 deduction, reducing your income tax bill accordingly.
Three ways to legally reduce SE tax
1. Deduct all legitimate business expenses. SE tax is calculated on net profit. Every dollar of deductible business expense reduces your SE tax base. Use our deductions checklist to find every write-off available to you.
2. Contribute to a retirement account. SEP-IRA, Solo 401(k), and SIMPLE IRA contributions reduce your income tax — but not SE tax directly. Still extremely valuable for the income tax savings and long-term wealth building.
3. Elect S-corporation status (higher income only). If your net SE income consistently exceeds $60,000–$80,000, electing S-corp status for your LLC can meaningfully reduce SE tax. You pay yourself a reasonable salary (subject to payroll taxes) and take remaining profit as distributions (not subject to SE tax). The setup and compliance costs make this worth exploring only at higher income levels — consult a CPA first.
SE tax and quarterly payments
Self-employment tax must be included in your quarterly estimated tax payments — many first-timers forget this and get a larger-than-expected bill at filing. Our 1099 tax estimator accounts for SE tax automatically.