6.2 Self-Employment Tax Deduction
Key Takeaways
- Self-employment tax is 15.3% (12.4% Social Security + 2.9% Medicare) applied to 92.35% of net self-employment earnings.
- For 2025, the Social Security wage base is $176,100 (max SS portion of SE tax $21,836.40); Medicare tax has no wage base limit.
- Additional Medicare Tax of 0.9% applies to SE income exceeding $200,000 (Single) / $250,000 (MFJ) / $125,000 (MFS).
- Self-employed individuals deduct 50% of SE tax as an above-the-line adjustment on Schedule 1, Line 15.
- Schedule SE is required when net self-employment income is $400 or more.
What Is Self-Employment Tax?
Self-employment tax is the Social Security and Medicare tax for self-employed individuals. The combined rate is 15.3%:
- 12.4% for Social Security
- 2.9% for Medicare
The 92.35% Multiplier
Net self-employment income is multiplied by 92.35% before calculating tax. This creates parity with W-2 employees.
Formula: Net SE Income × 0.9235 = Taxable SE Earnings
2025 Tax Rates and Limits
| Component | Rate | 2025 Wage Base | Maximum Tax |
|---|---|---|---|
| Social Security | 12.4% | $176,100 | $21,836.40 |
| Medicare | 2.9% | No limit | No maximum |
| Additional Medicare | 0.9% | Over threshold | No maximum |
Additional Medicare Tax Thresholds (unchanged statutory)
| Filing Status | Threshold |
|---|---|
| Single | $200,000 |
| MFJ | $250,000 |
| MFS | $125,000 |
The 50% Deduction
Self-employed taxpayers can deduct 50% of their SE tax on Schedule 1, Line 15. This above-the-line deduction reduces AGI.
Important: This deduction reduces income tax — it does NOT reduce SE tax itself.
Calculation Example (2025)
| Step | Description | Amount |
|---|---|---|
| 1 | Net Schedule C profit | $100,000 |
| 2 | × 92.35% | $92,350 |
| 3 | Social Security (12.4%) | $11,451 |
| 4 | Medicare (2.9%) | $2,678 |
| 5 | Total SE Tax | $14,129 |
| 6 | 50% deduction (Schedule 1) | $7,065 |
Maximum Social Security Portion of SE Tax in 2025
If net SE earnings (after 92.35% reduction) reach or exceed $176,100, the Social Security portion caps at:
$176,100 × 12.4% = $21,836.40
Medicare (2.9%) continues to apply to all earnings with no cap, plus the 0.9% Additional Medicare Tax on amounts over the threshold.
EA Exam Tips
- Know the 15.3% rate and the 92.35% multiplier
- 2025 wage base is $176,100 (up from $168,600 in 2024)
- 50% deduction is on Schedule 1, Line 15, not Schedule C
- $400 minimum in net SE earnings triggers Schedule SE filing
For 2025, what is the Social Security wage base for self-employment tax?
A self-employed taxpayer has $80,000 net profit in 2025. What amount is subject to self-employment tax?
Where is the deductible portion of self-employment tax reported?