When you work for yourself, you owe both the employee and employer share of Social Security and Medicare taxes — the self-employment tax. This calculator estimates that liability so freelancers, contractors, and small-business owners can set aside the right amount and avoid a shock at tax time.
Why self-employment tax exists
Employees split Social Security and Medicare taxes with their employer, each paying half. As a self-employed person you are both, so you pay the full 15.3% — 12.4% for Social Security and 2.9% for Medicare — on your net self-employment earnings. This is separate from and in addition to federal income tax.
How the calculation works
The tax applies to 92.35% of your net business profit (an adjustment that mirrors the employer-side deduction). Social Security's 12.4% portion applies only up to the annual wage base of $176,100 for 2025, while the 2.9% Medicare portion has no ceiling. You can then deduct half of the self-employment tax when calculating your income tax.
A worked example
On $50,000 of net freelance profit, 92.35% is $46,175. Applying 15.3% gives a self-employment tax of about $7,065. You can deduct roughly $3,533 of that on your income tax return, softening the overall burden — but you still need the full amount available to pay quarterly.
Staying ahead of the bill
- Set aside 25-30% of net profit to cover both self-employment and income tax combined.
- Pay quarterly estimated taxes to avoid underpayment penalties, using the IRS due dates in April, June, September, and January.
- Track business expenses carefully — every legitimate deduction lowers your net profit and therefore your self-employment tax.
- Consider whether an S-corp election could reduce self-employment tax once your profit is consistently high.