How self-employment tax works
When you're an employee, you pay 7.65% FICA and your employer pays the other 7.65%. When you work for yourself, you pay both halves, which is the 15.3% self-employment tax. To make it fair, you can:
- Calculate SE tax on only 92.35% of net profit, mirroring the employer's share not being wages.
- Deduct half of your SE tax from your income for income tax purposes.
Lower your self-employment taxes
- Track every business expense. Home office, mileage (70¢/mile was the 2025 rate), software, equipment and health insurance premiums can all reduce profit.
- Open a Solo 401(k) or SEP-IRA. They cut income tax, though not SE tax.
- Consider an S corporation once profit is consistently above about $60,000–$80,000. Paying yourself a reasonable salary can reduce SE tax on the rest.