Self-Employment Tax
The Social Security and Medicare tax (15.3% combined) paid by self-employed taxpayers on their net earnings from self-employment.
Detailed Explanation
Self-employment tax is computed on Schedule SE: 12.4% Social Security on net earnings up to $176,100 (2025) plus 2.9% Medicare with no cap, totaling 15.3%. An additional 0.9% Medicare surtax applies to high earners. Half of self-employment tax is deductible above the line on Form 1040. Sole proprietors, partners, and single-member LLC owners pay self-employment tax on their net earnings; S-corp shareholders avoid SE tax on profit distributions but must take reasonable W-2 wages.
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Learn about Individual Tax PreparationRelated Terms
Schedule C (Profit or Loss from Business)
The federal tax form filed with Form 1040 to report income and expenses of a sole proprietorship or single-member LLC treated as a disregarded entity.
Estimated Tax
Quarterly tax payments made by self-employed individuals, investors, and others whose income is not subject to sufficient withholding.
S Corporation
A pass-through tax election under Subchapter S of the Internal Revenue Code that avoids corporate double taxation while allowing shareholder-employees to reduce self-employment tax.
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