What Is Self-Employment Tax & How Often to Pay It?

Self-employment comes with many perks—you set your own hours, choose your projects, and answer only to yourself. But it also comes with new responsibilities, like figuring out your self-employment taxes.

While handling your own taxes might seem overwhelming at first, it’s a small price to pay for essentials like working roads, public schools, and emergency services. Employees at traditional 9-to-5 jobs typically have taxes withheld automatically. When you’re self-employed, it’s up to you to calculate and pay what you owe. Luckily, we’re here to walk you through it.

Important disclaimer

Throughout this article, we’ll repeat an essential piece of advice: Consult a qualified tax professional.

Taxes can get complicated quickly once you step outside a W-2. To avoid costly mistakes—or worse, an IRS audit—work with someone who specializes in self-employment tax issues.

This article is for informational purposes only and should not be considered tax advice.

What is self-employment tax?

Self-employment tax is how the federal government collects Social Security and Medicare taxes from people who aren’t on an employer’s payroll.

In a traditional job, your employer withholds payroll taxes from your paycheck and sends them to the government. If you’re self-employed, you’re responsible for paying both the employee and employer portions yourself.

Self-employment tax is separate from federal income tax. Even if you don’t owe much (or anything) in income tax, you might still owe self-employment tax.

What is the federal self-employment tax rate in 2025?

In 2025, the self-employment tax rate remains 15.3% of your net earnings:

• 12.4% for Social Security
• 2.9% for Medicare

Net earnings mean your gross income minus allowable business expenses.

If your net self-employment income exceeds $200,000 (or $250,000 if married filing jointly), you may owe an additional 0.9% Medicare surtax under the Affordable Care Act.

Also, the Social Security portion of the tax only applies to your first $168,600 of combined wages and net earnings in 2025. Earnings above this threshold are not subject to Social Security tax, but Medicare tax (and potentially the surtax) still applies.

What is self-employment tax used for?

Your self-employment tax payments fund:

• Social Security benefits (retirement, disability, survivor benefits)
• Medicare (health insurance for retirees and certain disabled individuals)

If you were an employee, your employer would split these payments with you. As your own boss, you cover both shares.

Who must pay self-employment tax?

You must pay self-employment tax if you have net earnings of $400 or more from self-employment activities in a year.

The IRS defines self-employment broadly—it includes freelance work, independent contracting, gig economy jobs, and income from running a sole proprietorship or single-member LLC.

You typically receive a Form 1099-NEC or 1099-K for this type of income.

How do you pay self-employment taxes?

Taxes in the U.S. are pay-as-you-go. This means you’re expected to pay taxes throughout the year as you earn income, not just when you file your annual return.

If you expect to owe at least $1,000 in federal taxes for the year, and your withholding and refundable credits won’t cover at least 90% of your tax liability (or 100% of last year’s tax), you must make quarterly estimated payments.

Quarterly estimated tax payments are generally due:

• April 15
• June 15
• September 15
• January 15 of the following year

You can make payments through the IRS’s Direct Pay system, the Electronic Federal Tax Payment System (EFTPS), or by mailing Form 1040-ES with a check.

If you wait until you file your tax return without making quarterly payments when required, the IRS may charge you penalties and interest.

What are self-employment tax deductions?

You can reduce your taxable income—and thus your self-employment tax—by claiming legitimate business deductions. Common deductible expenses include:

• Office supplies
• Business equipment (e.g., laptops, cameras, editing software)
• Business travel and meals (subject to limits)
• Home office expenses
• Marketing and advertising costs
• Professional services (legal, accounting, consulting fees)

Example:

‍If you earn $80,000 in freelance income but spend $10,000 on deductible business expenses, you only pay self-employment tax on $70,000 of net earnings.

Additionally, when you file your annual tax return, you can deduct 50% of your self-employment tax from your taxable income. This doesn't reduce your self-employment tax itself, but it does lower your overall income tax bill.

Note: Rules about home office deductions, vehicle expenses, and meal deductions can be complex. Always maintain thorough records and consult a tax expert for guidance.

Wrapping up

If you work in the entertainment industry, understanding self-employment tax is critical.

Many entertainment jobs are freelance or project-based, meaning you’re often responsible for tracking your own earnings, expenses, and tax payments across multiple gigs.

Fortunately, platforms like Wrapbook are making it easier than ever for entertainment professionals to manage their payments and paperwork. Wrapbook provides a friction-free experience for freelancers, helping you stay on top of your income and tax documentation—all in one place—so you can focus more on your creative work and less on administrative headaches.

For more articles on the business of entertainment, head over to The Wrapbook Blog.