Overview of Self-Employment Taxes

Primarily paid by individuals who work for themselves, self-employment (SE) tax consists of a social security tax and Medicare tax. SE tax payments contribute to an individual's coverage under the social security system---which provides certain retirement benefits, disability benefits, and survivor benefits---and help support Medicare, the national health insurance program that primarily provides health insurance coverage to individuals aged 65 and older.

Self-Employment Tax Rate

For 2020, the SE tax rate is 15.3%, which consists of a 12.4% tax for social security and a 2.9% tax for Medicare. The social security tax applies to an individual's first $137,700 of combined wages, tips, and net earnings. The Medicare tax applies to all of an individual's combined wages, tips, and net earnings.

Paying Self-Employment Taxes

Generally, you must pay SE tax and file Schedule SE (Form 1040) if either of the following applies.

  •  If your net earnings from self-employment were $400 or more; or

  • If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108.28 or more in wages from the church or organization. 

Estimated Tax Payments

Because self-employed individuals are not subject to the automatic payroll tax withholding that applies to ordinary employees, they generally need to make estimated tax payments to the IRS on a quarterly basis to avoid any penalties and/or interest. To learn more about how and when to make estimated tax payments, review MyTaxRights's blog post entitled Some taxpayers may be required to make estimated tax payments periodically to the IRS.

For additional information generally, see the IRS's Self-Employment Tax page.

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