What Is Self-Employment Tax?

Self-employment tax is the 15.3% tax self-employed people pay to cover Social Security (12.4%) and Medicare (2.9%) — the same taxes that are split between employees and employers in a regular job, but paid entirely by the self-employed person. It's calculated on your net self-employment earnings using Schedule SE. The good news: you can deduct half of what you pay in self-employment tax as an adjustment to income. This deduction reduces your AGI. Estimated quarterly payments help you avoid underpayment penalties.