Self-Employment Tax Guide 2025 — Rates, Deductions & Calculator
2025 IRS data — updated for current tax year
Self-Employment Tax Rate and Calculation
Self-employed individuals pay both the employee and employer halves of FICA taxes. The 2025 rate is 15.3%: 12.4% for Social Security (on income up to $176,100) and 2.9% for Medicare (no cap). However, you apply this rate to only 92.35% of net earnings — the IRS reduction approximates the employer's deduction on their half.
Deducting Half of SE Tax
The IRS lets you deduct 50% of self-employment tax from gross income when calculating adjusted gross income (AGI). This deduction reduces your federal income tax but not the SE tax itself. On $80,000 in net earnings, SE tax is ~$11,304. You deduct ~$5,652, reducing your federal taxable income to ~$59,348 after the standard deduction.
Quarterly Estimated Tax Payments
Self-employed workers must pay quarterly estimated taxes or face underpayment penalties. Due dates: April 15, June 16, September 15, and January 15 (following year). Use Form 1040-ES to calculate and pay.
Frequently Asked Questions
Do I pay self-employment tax on every dollar I earn?
No. SE tax applies only to 92.35% of net self-employment income. The Social Security portion (12.4%) also caps out once net earnings exceed $176,100 (2025 wage base).
Can I avoid SE tax with an S-corp?
Partially. S-corp owners pay themselves a "reasonable salary" subject to FICA, then take remaining profits as distributions not subject to SE tax. The IRS scrutinizes below-market salaries.