How Self-Employment Tax Works
When you work as a freelancer, independent contractor, or gig worker (DoorDash, Uber, Etsy, etc.), you pay self-employment tax in addition to federal and state income tax. This is because you're both the employer and the employee — so you pay both halves of FICA taxes.
Self-Employment Tax Rate (2026)
The self-employment tax rate is 15.3% of your net self-employment income:
- 12.4% for Social Security (on the first $174,900 of combined wages and SE income)
- 2.9% for Medicare (no income cap)
- 0.9% additional Medicare tax on income above $200,000 (single) or $250,000 (married filing jointly)
Key Deductions for Self-Employed Workers
- 50% SE tax deduction: You can deduct half of your self-employment tax from your adjusted gross income.
- QBI deduction: The Qualified Business Income deduction lets you deduct up to 20% of your qualified business income.
- Health insurance: Self-employed health insurance premiums are 100% deductible above the line.
- Retirement contributions: SEP IRA (up to 25% of net SE income) or Solo 401(k) ($23,500 employee + employer match in 2026).
- Business expenses: Home office, mileage (67 cents/mile in 2026), supplies, software, phone, internet.
Quarterly Estimated Tax Payments
Unlike W-2 employees who have taxes withheld from each paycheck, self-employed workers must make quarterly estimated tax payments using Form 1040-ES. The due dates are:
- Q1: April 15
- Q2: June 15
- Q3: September 15
- Q4: January 15 (following year)
If you don't pay enough through estimated payments, you may owe an underpayment penalty when you file your annual return.