Schedule C's net profit arrives here and becomes 15.3% on 92.35% of it — the tax an employee never sees because an employer pays half. The wage base caps the Social Security half; Medicare has no ceiling at all.
Who files it, and who does not
"Use Schedule SE (Form 1040) to figure the tax due on net earnings from self-employment." You must file it when line 4c, your net earnings from self-employment, comes to $400 or more. The Social Security Administration also uses the schedule "to figure your benefits under the social security program," which is why a small or loss year can still be worth reporting through an optional method (below).
Not everything a self-employed person earns counts. The instructions list what is left out, including:
- Wages as an employee, which carry Social Security and Medicare tax through the employer instead.
- Rent from real estate, unless you are a real estate dealer. It goes on Schedule E instead. See rental income and self-employment tax.
- Fees as a notary public. They are business income on Schedule C but not self-employment earnings. See the notary exemption.
- Gain on the sale of a capital asset or of business property that is not inventory.
Living abroad does not remove the tax: "Foreign earnings from self-employment can't be reduced by your foreign earned income exclusion when computing SE tax." Only a social security agreement with the country where you live can do that. See the foreign earned income exclusion and self-employment tax.
How the lines work
| Line | What it does |
|---|---|
| 2 | Net profit or loss from Schedule C, line 31 |
| 3 | Adds farm profit from Schedule F |
| 4a | Multiplies the total by 92.35% |
| 4c | Net earnings. Under $400, you stop: no tax is due |
| 7 | The Social Security maximum: $176,100 for 2025 |
| 8a–8d | Social Security wages and tips you already earned as an employee |
| 9 | What is left of the maximum |
| 10 | 12.4% of your net earnings, up to what is left |
| 11 | 2.9% of all your net earnings |
| 12 | Self-employment tax, carried to Schedule 2, line 4 |
| 13 | Half of it, carried to Schedule 1, line 15 |
For 2026 the Social Security maximum is $184,500.
A worked year
A net profit of $50,000 on Schedule C, and no other job:
| Step | Amount |
|---|---|
| Net earnings, $50,000 × 92.35% | $46,175 |
| Social Security part, 12.4% | $5,725.70 |
| Medicare part, 2.9% | $1,339.08 |
| Self-employment tax | $7,064.78 |
| Deductible half, to Schedule 1, line 15 | $3,532.39 |
Now give the same person a W-2 job in 2025 that paid $150,000 of Social Security wages. Only $26,100 of the $176,100 maximum is left, so the 12.4% part is $3,236.40 instead of $5,725.70. The Medicare part is unchanged, because it has no maximum. The tax falls to $4,575.48. The self-employment tax calculator runs these steps on your own figures.
Additional Medicare Tax
Above a threshold, a further 0.9% applies to self-employment income: $200,000 for single filers, heads of household and qualifying surviving spouses, $250,000 married filing jointly, and $125,000 married filing separately. Wages count against the same threshold first. It is figured on Form 8959, not on Schedule SE.
The optional methods
In a year with a loss or a small profit you can report more net earnings than the regular method gives, to keep earning Social Security credit or to qualify for credits that depend on earned income. For 2025:
- Farm optional method. Gross farm income of $10,860 or less, or net farm profits under $7,840. Net earnings are two-thirds of gross farm income, up to $7,240. There is no limit on how many years you use it.
- Nonfarm optional method. Net nonfarm profits under $7,840 and under 72.189% of gross nonfarm income, and net earnings of $400 or more in 2 of the 3 years before. It can be used "for only 5 years," which need not be consecutive, and you "can't report less than your actual net earnings."
Either can raise self-employment tax as well as credit, so the instructions advise figuring the credits with and without them.
Everything on this site that lands here
Each article declares the sheet its number ends up on, so this list is the writing itself rather than a summary of it.
| Read | Where it lands |
|---|---|
| $400 is not the line most people think it is | the $400 net-earnings test |
| You can pay the whole bill and still owe a penalty | paid across the year on Form 1040-ES |
| The exclusion does not touch the 15.3% | Self-employment tax — on profit Form 2555 already excluded |
| No form will ever arrive | Self-employment tax — or none of it, if you are somebody's household employee |
| How much tax on 1099 income? | Self-employment tax — the part no withholding ever covered |
| You can usually still go back three years | refiled for past years on Form 1040-X |
| The notary exemption is narrower than your fee | with the notary fee exclusion taken out |
| There are no self-employed tax brackets. | Self-employment tax, charged beside the brackets rather than inside them |
| The gym calls you a contractor. Three questions decide whether that is true. | or Form 8919, if the gym was really an employer |
| There is no such thing as a 1099 employee. | Self-employment tax, if you really are a contractor |
Common questions
I already get Social Security. Do I still pay self-employment tax?
My net profit was $420. Do I owe it?
I have a W-2 job as well. Does that change anything?
Is my rental income subject to self-employment tax?
Can I take back a year where I used the regular method?
The official page
Everything here is written from the IRS's own material, and the place to check it is Schedule SE on irs.gov. Figures and rules change; the source is what settles them.
- IRS: 2025 Instructions for Schedule SE (Form 1040)
- IRS: Schedule SE (Form 1040), Self-Employment Tax, 2025
- IRS Topic 554, Self-employment tax
- IRS Topic 751, Social Security and Medicare withholding rates
This is educational material, not tax advice. Your own situation may turn on facts this page does not know about.