Self Employment Tax: Definition, How It Works & How To File?

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Self-employment tax, a combination of Social Security and Medicare taxes, applies to freelancers and independent contractors at a 15.3% rate.

Self-employment tax

To determine self-employment tax, calculate 15.3% of your net earnings using IRS Form 1040 Schedule SE.

Self-employed individuals must pay both the employer and employee portions of Social Security and Medicare taxes.

Income Criteria

If your net income is below $400 (or $108.28 from a church), you are exempt from self-employment tax.

Deducting half of your self-employment tax on your income taxes can help reduce your overall tax liability.