How self-employment tax is calculated
Self-employment tax is not charged on the full net profit number directly. Schedule SE first multiplies net self-employment income by 92.35% to convert it to net earnings subject to self-employment tax. That adjustment reflects the employer-equivalent share before the tax itself is applied.
For 2025, the Social Security portion is 12.4% up to the applicable wage base, while the Medicare portion is 2.9% on the same net earnings figure. Half of the resulting self-employment tax is generally deductible as an above-the-line federal income-tax adjustment.
Net earnings subject to tax = Net self-employment income x 0.9235
Schedule SE starts from 92.35% of net self-employment income rather than from the full profit figure.
Social Security tax = Min(net earnings, remaining wage base) x 12.4%
The Social Security portion applies only up to the remaining 2025 wage base after any wage income already subject to Social Security tax.
Medicare tax = Net earnings subject to tax x 2.9%
The base Medicare portion applies to the same Schedule SE earnings figure used above.
Deductible half = Total self-employment tax / 2
One-half of self-employment tax is generally deductible on Schedule 1 as the employer-equivalent portion.