Self-Employment Tax — Definition and What It Means for Your Income
A 15.3% tax paid by self-employed individuals covering both employee and employer FICA shares.
Self-employment tax requires gig workers, freelancers, and business owners to pay both the employee and employer portions of FICA — 15.3% total (12.4% Social Security + 2.9% Medicare) on net self-employment income.
Why it matters
Gig and freelance workers face a significantly higher effective tax burden than W-2 employees at the same gross income, since they pay both halves of FICA.
Example
A gig worker earning $60,000 net pays approximately $8,478 in self-employment tax (15.3%), compared to roughly $4,590 in FICA (7.65%) that a W-2 employee earning the same amount would pay.
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Self-Employment Tax — FAQ
Can self-employment tax be deducted?
Yes. Self-employed individuals can deduct half of their self-employment tax as an adjustment to income, partially offsetting the higher rate.