How self-employment tax works
Employees share Social Security and Medicare tax with their employer. If you work for yourself, you pay both halves. The IRS states: "The self-employment tax rate is 15.3%", made up of "12.4% for social security" and "2.9% for Medicare".
- It starts at $400. You must pay it if your net earnings from self-employment were $400 or more.
- It is charged on 92.35% of your profit. IRS Topic 554: "Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment."
- The Social Security part has a limit. For 2026, the first $184,500 of your combined wages, tips and net earnings is subject to the 12.4% part. The 2.9% Medicare part has no limit.
- Half is deductible. You can deduct one-half of the self-employment tax when working out your income tax.
Social Security part = 12.4% × net earnings (up to $184,500 minus your W-2 wages)
Medicare part = 2.9% × net earnings
Self-employment tax = Social Security part + Medicare part
Example: $40,000 net profit, no other job
| Line | Amount |
|---|---|
| Net earnings subject to the tax ($40,000 × 92.35%) | $36,940.00 |
| Social Security part (12.4%) | $4,580.56 |
| Medicare part (2.9%) | $1,071.26 |
| Self-employment tax | $5,651.82 (14.1% of profit) |
| Deductible half | $2,825.91 |
Estimates at common profit levels (2026)
| Net profit | Self-employment tax | Share of profit |
|---|---|---|
| $5,000 | $706.48 | 14.1% |
| $10,000 | $1,412.96 | 14.1% |
| $20,000 | $2,825.91 | 14.1% |
| $40,000 | $5,651.82 | 14.1% |
| $80,000 | $11,303.64 | 14.1% |
Below the Social Security limit the tax is always 14.13% of net profit (15.3% × 92.35%).
What this means for sellers
- It is on profit, not on sales. Take off Etsy, eBay or payment fees, materials, postage and other business expenses first. The Etsy shop profit planner helps you track them.
- It comes on top of income tax. Set money aside through the year; many self-employed people make estimated payments each quarter.
- Build it into your prices. The freelance hourly rate calculator and the handmade pricing calculator start from what you need to keep.
This is an estimate for general information, not tax advice. It covers tax year 2026 and only the self-employment tax. Your situation may differ; check the IRS pages linked below or ask a tax professional.
Frequently asked questions
What is the self-employment tax rate for 2026?
15.3%: 12.4% for Social Security and 2.9% for Medicare, according to the IRS. It is applied to 92.35% of your net profit, and the Social Security part stops at $184,500 of combined wages and net earnings for 2026.
Do I pay self-employment tax on Etsy income?
If you sell as a business and your net earnings from self-employment are $400 or more, the IRS says you usually must pay it. It is worked out on profit after business expenses, not on total sales.
How much self-employment tax do I pay on $10,000?
About $1,412.96: $10,000 × 92.35% × 15.3%. That is 14.13% of the profit.
Is self-employment tax the same as income tax?
No. It only covers Social Security and Medicare. Federal and state income tax are separate and are not included in this calculator.
Can I deduct self-employment tax?
The IRS lets you deduct one-half of your self-employment tax when working out your adjusted gross income. The calculator shows that half.
Sources
IRS: Self-employment tax (Social Security and Medicare taxes) · IRS Topic no. 554, Self-employment tax
Last reviewed: November 2026 · By Muhammad Shujah Uddin Qazi · How we check rates · Fee changes tracker