Quick answer
Self-employment tax is 15.3% of your net earnings from self-employment: 12.4% for Social Security and 2.9% for Medicare. Net earnings are generally 92.35% of your net profit, and you owe the tax and file Schedule SE once they are $400 or more. You can then deduct one-half of the self-employment tax when you figure your adjusted gross income.
Nation, an AI store builder, publishes this page. It is pre-launch, with a waitlist on withnation.ai, so it is not in the fee comparison. See where Nation fits.
What self-employment tax is and how the IRS charges it
Self-employment tax is the Social Security and Medicare tax that people who work for themselves pay on their business profit. The IRS describes it as similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. A maker who sells candles, prints or jewelry as a sole proprietor has no employer withholding it, so the tax is figured on Schedule SE and paid through their own return.
The self-employment tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It is charged on net earnings from self-employment, which are generally 92.35% of your net profit. You owe it, and file Schedule SE, once those net earnings are $400 or more.
It is separate from income tax, which you also pay on the same profit. The rules apply no matter how old you are and even if you are already receiving Social Security or Medicare. Self-employment tax is a federal tax, so the rate does not change from state to state, but state and city income tax rules vary. This page is general information, not tax advice. Figures were checked on IRS and Social Security Administration pages on 3 Oct 2026.
Self-employment tax rate for 2025 and 2026
The 15.3% rate has two parts with different limits. The Social Security part stops at a yearly cap on earnings, which the Social Security Administration calls the contribution and benefit base. The Medicare part has no cap: the Social Security Administration states there has been no limitation on HI-taxable earnings (HI is Medicare's hospital insurance). Higher earners pay an Additional Medicare Tax on top.
The rate itself is the same for 2026: the Social Security Administration lists the Social Security rate on self-employment income in 2026 as 12.4 percent. What changes each year is the Social Security cap. The Additional Medicare Tax is figured on Form 8959, separately from Schedule SE.
Who has to pay self-employment tax
The IRS says you must pay self-employment tax and file Schedule SE if your net earnings from self-employment are $400 or more, or if you had church employee income of $108.28 or more. For most makers the first test is the one that matters, and it holds even if you also have a job.
It applies to sole proprietors and independent contractors, who figure their profit on Schedule C. The IRS counts the member of a single member LLC that's disregarded for federal income tax purposes as a sole proprietor here, so the owner of that kind of LLC pays it the same way.
The test is on net earnings, which are 92.35% of net profit, so a profit a little above $400 can still fall under it. Example: a net profit of $420 gives net earnings of $387.87. Schedule SE says that if net earnings are less than $400, you stop there and do not owe the tax.
Selling online does not change the test. A payment app or marketplace is required to send a Form 1099-K only when payments are over $20,000 in more than 200 transactions. The IRS still says you must report all income on your tax return, whether or not a form arrives, and self-employment tax follows the profit you report.
How to calculate self-employment tax
These are the same steps Schedule SE walks through. Use the cap for the tax year you are filing.
Find your net profit
Start with the net profit from Schedule C. You get it by subtracting ordinary and necessary trade or business expenses from the gross income, so materials, platform fees, packaging and shipping supplies all come off first. Every business expense you deduct on Schedule C lowers both income tax and self-employment tax, because both start from net profit.
Work out net earnings
Multiply net profit by 92.35%. The result is your net earnings from self-employment, the figure every later step uses.
Check the threshold
If net earnings are under $400, you owe no self-employment tax for the year. If they are $400 or more, carry on.
Apply the Social Security part
Multiply net earnings by 12.4%, up to the yearly cap: $176,100 for 2025 or $184,500 for 2026. The cap counts combined wages, tips, and net earnings together, so wages from a job use up part of it first.
Apply the Medicare part
Multiply all net earnings by 2.9%. This part has no cap. If your earnings pass the Additional Medicare Tax threshold, figure that extra 0.9% on Form 8959.
Add the parts and take the deduction
The two parts together are your self-employment tax, which goes on Schedule 2 of Form 1040. Then deduct one-half of the self-employment tax on Schedule 1 (Form 1040).
Worked example: self-employment tax on a maker's profit
Example: a candle maker sells $40,000 of candles in 2026 and spends $15,000 on wax, jars, platform fees and shipping supplies. That leaves a net profit of $25,000. These are example figures, not a real shop, and the example assumes no wages from a job and single filing status. To use the table as a self-employment tax calculator, put your own net profit in the first row and repeat each step.
The same steps at other example profit levels, with the 2026 cap of $184,500 and the same assumptions: a $5,000 profit gives $706.48 of self-employment tax and a $353.24 deduction. A $60,000 profit gives $8,477.73 and a $4,238.87 deduction. A $200,000 profit gives net earnings of $184,700, just over the cap, so the Social Security part stops at the cap and the tax is $28,234.30.
Self-employment tax is only part of the bill. Income tax is charged on the same profit after the deduction, at your own bracket, plus any state income tax.
Schedule SE: the self-employment tax form and its instructions
Schedule SE (Form 1040) is the self-employment tax form. You fill it in after Schedule C, because it starts from your net profit. The tax it produces goes on Schedule 2, and the deduction goes on Schedule 1 (Form 1040).
Schedule SE also feeds your Social Security record. The IRS says the Social Security Administration uses it to figure your benefits under the social security program, so years with self-employment profit count toward the benefits you can claim later.
The Schedule SE instructions cover the cases this page leaves out: church employees, ministers, farm income, partnership income and the two optional methods. The optional methods can give you credit toward your social security coverage in a year with a loss or a small profit, but the instructions warn that they may also increase your SE tax. Read the instructions for the tax year you are filing, since the cap in them changes every year.
The self-employment tax deduction
The IRS lets you deduct the employer-equivalent portion of your self-employment tax when you figure adjusted gross income. In practice that is one-half of the self-employment tax. In the worked example, that is the last row of the table.
The deduction only affects your income tax. It lowers the income that income tax is charged on. It does not lower your net earnings from self-employment, and it does not lower the self-employment tax itself.
To lower self-employment tax, you lower net profit. That means claiming the ordinary and necessary business expenses you have on Schedule C, such as materials, platform fees and packaging.
Paying self-employment tax during the year
No employer withholds self-employment tax for you. The IRS says estimated tax payments cover self-employment tax as well as income tax, and that individuals, including sole proprietors, generally have to make them if they expect to owe $1,000 or more when they file.
The year is split into four payment periods, each with its own due date. If you underpay in a period, you may be charged a penalty even if you are due a refund. The guide to quarterly estimated taxes covers the dates and how to size each payment.
A simple way to stay ahead is to move a share of every payout into a separate account. The worked example above gives a starting point for the self-employment part; add your expected income tax on top.
Where Nation fits
Nation
Category: an AI store builder
Nation says one description of what you make builds the store, then agents handle orders, customers and delivery and run ads, content and social posts, with you approving the work. This page is general tax information, and nothing on it depends on using Nation.
Limits today
- Status: pre-launch, with a waitlist on withnation.ai.
- Pricing and fees: not announced yet.
- Shopper marketplace: no shopper marketplace has been announced.
- Track record: no independent reviews or public stores yet.
Nation publishes this page. It explains a federal tax in general terms and is not tax advice.
Describe what you makeQuestions about self-employment tax
What is the self-employment tax rate for 2026?
The self-employment tax rate for 2026 is 15.3%: 12.4% for Social Security and 2.9% for Medicare. The Social Security part applies only up to $184,500 of combined wages and net earnings in 2026. The Medicare part has no cap, and an Additional Medicare Tax of 0.9% applies above $200,000 for single filers.
How do I calculate self-employment tax?
To calculate self-employment tax, multiply your net profit from Schedule C by 92.35% to get net earnings. Multiply net earnings by 12.4% up to the yearly Social Security cap, and by 2.9% with no cap, then add the two. Example: a $25,000 net profit gives $23,087.50 of net earnings and $3,532.39 of self-employment tax.
Do I pay self-employment tax on a small side business?
The owner of a small side business owes self-employment tax once the business's net earnings from self-employment are $400 or more, even if the owner also has a job. Below that amount there is no self-employment tax, but the income still counts for income tax. The IRS says you must report all income on your tax return, whether or not a platform sends a Form 1099-K.
Is self-employment tax deductible?
Self-employment tax is partly deductible. You can deduct one-half of the self-employment tax when you figure adjusted gross income, and you claim it on Schedule 1 (Form 1040). The deduction only affects your income tax: it does not reduce your net earnings from self-employment or the self-employment tax you owe for the year.
What form do I use for self-employment tax?
The self-employment tax form is Schedule SE (Form 1040). You figure your profit on Schedule C, work out the tax on Schedule SE, and the result goes on Schedule 2. The IRS publishes Schedule SE instructions for each tax year with that year's Social Security cap, which was $176,100 for 2025.