Question 1

What is the self-employment tax rate for 2026?

Accepted Answer

15.3% on 92.35% of your net business income. That's 12.4% for Social Security (capped at $184,500 in income) and 2.9% for Medicare (no cap). Once you cross $200K in net SE income, tack on another 0.9% Medicare surcharge on everything above that. Basically, you're covering both the employee and employer sides of FICA since you are both.

Question 2

How do quarterly estimated tax payments work?

Accepted Answer

If you're self-employed, the IRS wants its money throughout the year, not just at tax time. You make four payments — April 15, June 15, September 15, and January 15 — each covering roughly a quarter of what you expect to owe (income tax plus SE tax). To dodge underpayment penalties, you generally need to pay at least 100% of last year's tax bill (110% if your AGI was over $150K) or 90% of this year's. You can pay online through IRS Direct Pay or EFTPS.

Question 3

Can I deduct half of my self-employment tax?

Accepted Answer

Yes! It's an above-the-line deduction, meaning you get it whether you itemize or not. If your SE tax is, say, $14,130, you deduct $7,065 from your income before calculating income tax. It lowers your AGI, which can help with state taxes too and maybe keep you under certain income thresholds. Just know it doesn't reduce the SE tax itself — that still needs to be paid in full.

Question 4

How does self-employment tax compare to W-2 FICA withholding?

Accepted Answer

W-2 employees pay 7.65% and their employer matches another 7.65%. When you're self-employed, you're both — so you pay the full 15.3%. The 92.35% adjustment and the half-of-SE-tax deduction help soften the blow somewhat, but on $100K of income, you're still paying roughly $7,000 more in payroll taxes than a W-2 worker making the same amount. It's the cost of being your own boss.

Question 5

What tax deductions are available for self-employed individuals?

Accepted Answer

There's actually a lot to work with. Half your SE tax is deductible above the line. You can stash up to $72,000 in a Solo 401(k) for 2026 (including the employer portion). Health insurance premiums? Deductible above the line. Home office — $5 per square foot up to 300 sq ft using the simplified method, or actual expenses if you want to go that route. Business expenses like software, travel, meals (50%), supplies, and professional services all count. And don't forget the Qualified Business Income deduction, which can shave up to 20% off your qualified business income. That one's easy to miss.

Question 6

Should I form an S-Corporation to save on self-employment tax?

Accepted Answer

Maybe. The play is to split your income between a reasonable salary (subject to FICA/SE tax) and distributions (not subject to SE tax). On $150K of net income, you might take a $75K salary and $75K in distributions, saving SE tax on that second half. But — and it's a big but — S-Corps come with extra paperwork, payroll requirements, state fees, and more complex tax returns. The math usually makes sense once you're consistently clearing $60K–$80K in net income. Below that, the hassle probably isn't worth it. Talk to a CPA about your specific situation.

Question 7

What happens if I don't pay quarterly estimated taxes?

Accepted Answer

You'll probably get hit with an underpayment penalty when you file your return — even if you pay everything by April 15. The penalty is basically interest on what you should've paid each quarter, usually running 3–8% annually depending on the IRS rate that quarter. Easiest way to avoid it: hit the safe harbor by paying 100% of last year's tax (110% if your AGI was over $150K) or 90% of this year's through withholding and estimated payments.

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