Glossary
Self-employment tax
The Social Security and Medicare tax paid by people who work for themselves — both halves.
Self-employed people pay the employee and employer shares together: 12.4% for Social Security up to the annual wage base plus 2.9% for Medicare with no cap, a combined 15.3%. It applies to 92.35% of net profit, and only once net earnings reach $400 for the year. Half of the base self-employment tax is deductible from income, which lowers income tax but not the self-employment tax itself. It is calculated on Schedule SE and usually paid through quarterly estimated payments.