What is Self-Employment Tax?
Social Security and Medicare taxes for individuals who work for themselves, currently 15.3% of net earnings.
Definition
Self-employment tax is the Social Security and Medicare tax for self-employed individuals. When you're employed, your employer pays half of these taxes, but self-employed individuals must pay both portions. The current rate is 15.3% (12.4% for Social Security on the first $168,600 of net earnings in 2024, plus 2.9% for Medicare on all net earnings).
Who Needs to Know This?
Self-employed individuals with net earnings of $400 or more, including freelancers, independent contractors, and small business owners.
Key Deadline
Quarterly estimated payments due April 15, June 15, September 15, January 15
Potential Penalties
Underpayment penalties if you don't pay enough through estimates
Related Forms
Common Mistakes to Avoid
- 1Forgetting to pay quarterly estimated taxes
- 2Not deducting the employer-equivalent portion (50%)
- 3Confusing self-employment tax with income tax
- 4Not keeping proper records of business expenses
Related Terms
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