Self-Employed Tax USA: Rates, Deductions & Filing

Self-employment tax = Social Security (12.4%) + Medicare (2.9%) = 15.3%

Applies to 92.35% of net self-employment income

Social Security portion caps at $168,600 (2026) Medicare has no cap — plus 0.9% additional Medicare tax on income over $200,000 (single) or $250,000 (married filing jointly)

Formula: Net income × 92.35% × 15.3% = SE tax

Legal strategies to reduce SE tax: 1. S-Corp election — pay yourself a reasonable salary, take remainder as distributions 2. Maximize business deductions to lower net income 3. Retirement contributions (SEP-IRA: up to 25% of net earnings) 4. Health insurance deduction 5. 50% SE tax deduction on your 1040

States with no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming

High-tax states to be aware of: California (13.3%), Hawaii (11%), New Jersey (10.75%), Oregon (9.9%), Minnesota (9.85%)

Some states also impose gross receipts taxes or franchise taxes on businesses.