The US Social Security and Medicare tax the self-employed pay on their net earnings, currently 15.3%, covering both the employer and employee portions.
Self-employment tax is the Social Security and Medicare tax the self-employed pay on their net earnings — currently 15.3%. When you’re an employee, your employer covers half of this; when you work for yourself, you pay both halves. It’s on top of regular income tax, which catches many freelancers off guard.
For sellers, this is why “I made $80,000” doesn’t mean $80,000 to spend. Self-employment tax applies to your net profit after business expenses, so tracking deductions genuinely lowers what you owe. It’s paid through quarterly estimated taxes during the year. For buyers, this is part of why contractor rates look higher than an equivalent salary — the pro is covering taxes an employer would otherwise share.
You do get to deduct half of the self-employment tax on your income tax return, which softens the blow. Electing S-corp status can reduce it at higher incomes. The rate and thresholds change, and the rules are genuinely tricky, so confirm your situation with a tax professional.