The self-employment tax is the tax paid by self-employed individuals to fund Social Security and Medicare. It is similar to the payroll taxes that employees pay, but since self-employed individuals are both the employer and the employee, they are responsible for the entire amount.
As of 2025, the maximum self-employment tax is calculated as follows:
Social Security Tax:
Rate: 12.4%
Applies to: Net earnings up to $160,200 in 2025.
Maximum Social Security Tax: $160,200 (maximum taxable earnings) × 12.4% = $19,849.20.
Medicare Tax:
Rate: 2.9%
Applies to: All net earnings, with no upper limit.
Maximum Medicare Tax (on earnings of $160,200 as an example): $160,200 × 2.9% = $4,642.60.
Additional Medicare Tax:
Rate: 0.9%
Applies to: Net earnings over $200,000 for individuals or $250,000 for married couples filing jointly.
This tax is only applied to the income over these thresholds.
Total Self-Employment Tax Example on $160,200 of earnings:
-
- Social Security: $19,849.20
- Medicare: $4,642.60
- Additional Medicare: $0.00 (Under the limit)
- Total = $24,491.80 (for earnings up to $160,200).
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