26 U.S.C. § 1401
§ 1401. Rate of tax
Explainer
Self-employment tax
Freelancers pay both halves of Social Security and Medicare: 15.3% on about 92% of net profit, starting at just $400 of earnings.
In plain English
Employees split Social Security and Medicare tax with their employer, 7.65% each. When you work for yourself, you're both sides, so section 1401 charges 15.3%: 12.4% for Social Security and 2.9% for Medicare. It's a separate tax on top of income tax, and for many new freelancers it's the bigger surprise of the two.
The tax applies to net earnings from self-employment, defined in § 1402. That's your profit after business expenses, multiplied by 92.35%. The 92.35% factor mirrors the fact that employees never pay tax on the employer's half. You then deduct half of the self-employment tax when working out your income tax (§ 164(f)).
Who it touches
Sole proprietors, freelancers, gig workers, independent contractors, partners in most partnerships, and owners of single-member LLCs that haven't elected to be taxed as a corporation. It starts once net earnings reach just $400 a year.
The 2026 numbers
| Item | Amount |
|---|---|
| Social Security part | 12.4% on net earnings up to $184,500 (minus any wages already taxed) |
| Medicare part | 2.9% on all net earnings |
| Additional Medicare tax | extra 0.9% above $200,000 single / $250,000 joint |
| Filing threshold | $400 of net earnings |
Worked example
Mia is a freelance designer with $50,000 of profit in 2026.
- Net earnings from self-employment: $50,000 × 92.35% = $46,175
- Self-employment tax: $46,175 × 15.3% = $7,065
- Half of that, $3,532, is deducted when she works out her income tax
She owes this on top of her income tax. If nothing was withheld during the year, she's expected to pay quarterly estimates (§ 6654).
Watch out for
- Profit you keep in the business still counts. The tax follows net earnings, not what you take out.
- Some owners elect S-corporation status so part of their profit is paid as distributions rather than salary. It has its own rules, costs and IRS scrutiny. That's a decision to make with a professional.
- Residents of countries with a US totalization agreement may pay into their home system instead. The Nordic countries (Denmark, Finland, Iceland, Norway, Sweden) have one with the US. Estonia, Latvia and Lithuania don't.
Draft explainer. Figures checked against IRS Rev. Proc. 2025-32 and the current text on November 4, 2026. Not yet reviewed by a licensed tax professional.
Sources
The law as written
Current through Public Law 119-102. Amendment notes omitted.
Structure
In addition to other taxes, there shall be imposed for each taxable year, on the self-employment income of every individual, a tax equal to 12.4 percent of the amount of the self-employment income for such taxable year.
In addition to the tax imposed by the preceding subsection, there shall be imposed for each taxable year, on the self-employment income of every individual, a tax equal to 2.9 percent of the amount of the self-employment income for such taxable year.
In addition to the tax imposed by paragraph (1) and the preceding subsection, there is hereby imposed on every taxpayer (other than a corporation, estate, or trust) for each taxable year beginning after December 31, 2012, a tax equal to 0.9 percent of the self-employment income for such taxable year which is in excess of—
in the case of a joint return, $250,000,
in the case of a married taxpayer (as defined in section 7703) filing a separate return, ½ of the dollar amount determined under clause (i), and
in any other case, $200,000.
The amounts under clause (i), (ii), or (iii) (whichever is applicable) of subparagraph (A) shall be reduced (but not below zero) by the amount of wages taken into account in determining the tax imposed under section 3121(b)(2) with respect to the taxpayer.
During any period in which there is in effect an agreement entered into pursuant to section 233 of the Social Security Act with any foreign country, the self-employment income of an individual shall be exempt from the taxes imposed by this section to the extent that such self-employment income is subject under such agreement exclusively to the laws applicable to the social security system of such foreign country.