2026 Self-Employment Tax Rate: What It Is and How to Calculate It

The self-employment tax rate is 15.3%. That sounds like a lot — and it is — but you don't actually pay 15.3% on all of your self-employment income. Here's how SE tax really works, especially if you have a W-2 job alongside your side business.

What is self-employment tax?

When you work a W-2 job, you pay 7.65% of your wages for Social Security (6.2%) and Medicare (1.45%). Your employer pays the other 7.65%. Together that's 15.3%.

When you're self-employed, you're both the employee and the employer. So you pay both halves — the full 15.3%. That's the self-employment tax.

SE tax is separate from income tax. Even if your income is low enough that you owe zero income tax, you still owe SE tax on your net self-employment earnings. It's reported on Schedule SE and paid alongside your income tax (usually through quarterly estimated payments).

The 2026 SE tax rate breakdown

The Social Security portion (12.4%) has a wage base limit — it only applies to the first $176,100 of combined wages and self-employment income in 2026. The Medicare portion (2.9%) has no limit and applies to all SE income.

Three things that reduce your SE tax

1. The 92.35% multiplier

You don't pay SE tax on 100% of your net self-employment income. The IRS applies a 92.35% factor first. This mirrors the fact that W-2 employees don't pay FICA on the employer's share. On $50,000 of LLC profit, you pay SE tax on $46,175 — not $50,000.

2. The deduction for half of SE tax

You can deduct the employer-equivalent half (7.65%) of your SE tax from your adjusted gross income. This is an "above the line" deduction — you get it regardless of whether you itemize. It lowers your income tax, though not your SE tax itself.

For example, if your total SE tax is $3,533, you can deduct $1,766 from your AGI. If you're in the 22% bracket, that saves you an additional $388 in income tax.

3. The Social Security wage base

Social Security tax (12.4%) only applies up to $176,100 of combined wages and self-employment income in 2026. If your W-2 salary already covers most of that cap, your side business income might owe little or no Social Security tax — just the 2.9% Medicare portion.

This is a big deal for higher earners. If your W-2 salary is $160,000, only the first $16,100 of your LLC income is subject to Social Security tax. Everything above that owes only 2.9% Medicare.

How SE tax varies by W-2 salary

Your W-2 salary affects your SE tax because both count toward the Social Security wage base. Here's how $25,000 in LLC profit is taxed at different salary levels:

At $25K LLC profit, the SE tax is the same until your W-2 salary exceeds the wage base. Once your salary passes $176,100, your LLC income owes only Medicare tax — dropping the effective SE rate from 14.1% to just 2.7%.

The Additional Medicare Tax

There's a third layer that kicks in at high income levels: the Additional Medicare Tax of 0.9%. It applies to combined wages and SE income over $200,000 (single) or $250,000 (married filing jointly).

This tax only hits the amount above the threshold. If you earn $180,000 in W-2 wages and $40,000 in LLC profit, the Additional Medicare Tax applies to $20,000 ($220,000 total minus $200,000 threshold) = $180 extra.

Unlike the regular Medicare tax, the Additional Medicare Tax has no employer match — it's only on the employee side.

Example: $50K W-2 salary + $25K LLC profit

Here's how SE tax works for someone earning $50,000 from a W-2 job and $25,000 from an LLC:

1. Net SE income: $25,000 × 92.35% = $23,087
2. Social Security: $23,087 × 12.4% = $2,863 (under the wage base since $50K + $23K < $176,100)
3. Medicare: $23,087 × 2.9% = $670
4. Total SE tax: $3,533
5. Deductible half: $1,766 (reduces your income tax)

Your effective SE tax rate on the $25,000 LLC profit is about 14.1% — not the full 15.3%.

Example: $160K W-2 salary + $40K LLC profit

Now here's someone where the wage base matters:

1. Net SE income: $40,000 × 92.35% = $36,940
2. Social Security room: $176,100 − $160,000 = $16,100. Only $16,100 of the $36,940 is subject to SS tax.
3. Social Security: $16,100 × 12.4% = $1,996
4. Medicare: $36,940 × 2.9% = $1,071
5. Total SE tax: $3,067
6. Deductible half: $1,534

Effective SE tax rate: 7.7%. The W-2 salary consumed most of the Social Security wage base, cutting the SE tax nearly in half compared to someone without a W-2 job.

Common misconceptions

"I pay 15.3% on all my LLC income." No — the 92.35% multiplier reduces the base, the deduction for half of SE tax reduces your income tax, and if your W-2 salary is high enough, the Social Security cap kicks in.

"SE tax is the same as income tax." They're separate taxes. SE tax funds Social Security and Medicare. Income tax is based on your total taxable income across brackets. You pay both.

"My LLC income is taxed twice." It's not double-taxed. SE tax covers the payroll taxes that W-2 employers split with employees. Income tax is applied to the profit that remains after the SE tax deduction. They're different taxes on different bases.

How SE tax connects to write-offs

Every LLC business expense you write off reduces your SE tax, not just your income tax. A $1,000 write-off saves you approximately $141 in SE tax (14.1% effective rate) plus whatever your income tax marginal rate yields. This is why the combined "discount" on business expenses is often 30–40% — it's the sum of income tax savings and SE tax savings.

Why this matters for your W-2 + LLC situation

If you have a W-2 job that already pays into Social Security, your side business may owe less SE tax than you think. The key variable is how close your W-2 wages are to the Social Security wage base ($176,100). The closer you are, the less Social Security tax your LLC income owes.

Our write-off calculator factors in your W-2 income when computing the real after-tax cost of business expenses, so the SE tax impact is already accounted for in your results.