What Is Self-Employment Tax?
When you work for an employer, they pay half of your Social Security and Medicare contributions and you pay the other half. When you're self-employed, you pay both halves yourself. I built this calculator specifically for freelancers, contractors, and sole traders who need a quick estimate of what they owe before they set aside money for quarterly payments.
How the US Self-Employment Tax Is Calculated
In the United States, the self-employment tax rate is 15.3% on net self-employment income up to the Social Security wage base, then 2.9% on anything above it. The calculation breaks down like this:
- Net earnings subject to SE tax:
Net Profit × 0.9235(you multiply by 92.35% because you can deduct half of SE tax from gross income) - SE Tax:
Net Earnings × 15.3%(up to the wage base) - Deduction: You can then deduct half of the SE tax paid when calculating your income tax, which partially offsets the burden.
Outside the US, similar systems exist under different names. In the UK, self-employed people pay Class 2 and Class 4 National Insurance contributions. In Canada, self-employed individuals pay both the employee and employer portions of Canada Pension Plan (CPP) contributions. Use the country selector to see how your region's system is applied.
Frequently Asked Questions
Do I owe self-employment tax on all my income?
In the US, SE tax applies to net self-employment income of $400 or more per year. If your net profit is below that threshold, you generally do not owe SE tax for that year, though other filing requirements may still apply.
What are quarterly estimated payments?
Because self-employed people don't have an employer withholding tax from each paycheck, the IRS expects you to pay tax in four installments throughout the year. These are due in April, June, September, and January. Failing to make adequate payments can result in underpayment penalties, so using a tool like this to estimate your liability early helps you set money aside.
How accurate is this estimate?
This calculator provides a general estimate based on published tax rates and standard deduction rules. It does not account for business expense deductions, retirement contributions, health insurance deductions, or changes in annual wage base limits. This is an estimate — consult a tax professional for advice specific to your situation.
