Question 1

What is self-employment tax?

Accepted Answer

Self-employment tax is the Social Security and Medicare tax that self-employed individuals pay. Unlike W-2 employees who split these taxes with their employer (each paying 7.65%), self-employed workers pay both halves — 12.4% for Social Security and 2.9% for Medicare — for a combined 15.3% on the first $176,100 of net earnings in 2025.

Question 2

Why is 92.35% of my earnings used as the taxable base?

Accepted Answer

The IRS allows self-employed individuals to multiply net earnings by 92.35% (100% minus the 7.65% employer-equivalent portion) before calculating SE tax. This adjustment mimics the fact that W-2 employees do not pay FICA tax on the employer-paid portion. It effectively reduces your SE tax base by about 7.65%.

Question 3

Can I deduct self-employment tax?

Accepted Answer

Yes. You can deduct the employer-equivalent portion (50%) of your self-employment tax as an above-the-line deduction on your Form 1040. This means you do not need to itemize to take this deduction. It reduces your adjusted gross income, which lowers your income tax but does not reduce your SE tax itself.

Question 4

When are estimated tax payments due?

Accepted Answer

Self-employed individuals must make quarterly estimated tax payments by January 15, April 15, June 15, and September 15. If you do not pay enough throughout the year, you may face an underpayment penalty. Use Form 1040-ES to calculate and submit your quarterly payments.

Question 5

What is the Additional Medicare Tax for self-employed workers?

Accepted Answer

An additional 0.9% Medicare tax applies to self-employment income above $200,000 for single filers ($250,000 for married filing jointly). This is on top of the regular 2.9% Medicare tax. Unlike the regular SE tax, you cannot deduct the additional Medicare tax. It was introduced by the Affordable Care Act.

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