Self-Employed Taxes Explained (2025)

Going self-employed changes how you’re taxed in one big way: you owe self-employment tax on top of regular income tax. That’s because when you work for yourself, you’re both the employee and the employer — so you pay both halves of Social Security and Medicare.

The 15.3% self-employment tax

Self-employment (SE) tax is 15.3%: 12.4% for Social Security (up to the $176,100 wage base) plus 2.9% for Medicare (no cap). An employee splits this 50/50 with their employer; you cover all of it.

Income tax is separate and on top

SE tax only covers Social Security and Medicare. You still owe federal (and usually state) income tax on your business profit, at the same progressive brackets as everyone else — see effective vs marginal rates.

Quarterly estimated taxes

With no employer withholding, the IRS expects you to pay as you go via quarterly estimated payments (roughly mid-April, June, September and January). Missing them can mean an underpayment penalty. A common rule of thumb is to set aside 25–30% of profit for taxes, more at higher incomes.

Deductions that lower the bill

• Business expenses — home office, equipment, software, mileage.
• Half of SE tax — an automatic above-the-line deduction.
• Self-employed retirement plans — SEP-IRA or Solo 401(k) can shelter a lot of income.
• Health insurance premiums — often deductible for the self-employed.

Estimate the employee side first

To get a feel for the income-tax portion, you can model an equivalent salary in our calculator — just remember to add the employer half of FICA that an employee wouldn’t see.