Self-Employment Tax Explained for Gig & 1099 Workers

What Self-Employment Tax Is

Self-employment tax is how the self-employed pay into Social Security and Medicare. As an employee, you pay half (7.65%) and your employer pays the other half. When you work for yourself, you're both — so you pay the full 15.3%.

Who Pays It

Anyone with net self-employment earnings of $400 or more in a year: freelancers, 1099 contractors, and gig workers (Uber, Lyft, DoorDash, Instacart, Amazon Flex). It's separate from — and on top of — your federal and state income tax.

A Simple Example

Say your net self-employment income for the year is $40,000:

• Self-employment tax ≈ $40,000 × 92.35% × 15.3% ≈ $5,652
• You can deduct about half ($2,826) when figuring income tax
• Income tax applies separately, based on your bracket and state

Illustrative only; the 92.35% factor reflects the portion of net earnings subject to SE tax.

How Much to Set Aside

A practical rule: reserve 25–30% of your net incomefor self-employment tax plus income tax combined. Move it to a separate savings account as you earn, and you'll never be surprised. Most self-employed people pay quarterly estimated taxes to avoid penalties.

See It on a Pay Stub

A clear way to track this is a pay stub that breaks out estimated taxes. Our 1099 pay stub generator estimates self-employment and income tax automatically, and a profit and loss statement helps you track deductible expenses that lower the bill.