2016 Self-Employment Tax
For 2016, the Self-Employment Tax is 15.3% (Rate), 12.4% (Social security rate), 2.9% (Medicare rate) and 92.35% (Share of net earnings taxed).
Effective 2016-01-01Source: Publication 334 (2016), Tax Guide for Small Business (IRS)Verified 2026-08-29
Who it applies to
Self-employed individuals who file Schedule SE (Form 1040) for tax year 2016.
What changed this year, and why
The 2016 self-employment tax rate and its components, and the share of net earnings subject to the tax.
Common questions
- What is the self-employment tax rate and its components?
- The self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare. The tax applies to 92.35% of net self-employment earnings.
- What share of net earnings is subject to self-employment tax?
- Net earnings from self-employment are multiplied by 92.35% to arrive at the amount subject to self-employment tax.
The $400 threshold that makes Schedule SE mandatory
You must file Schedule SE with your federal income tax return if your net earnings from self-employment reached $400 or more in the year. This rule applies whether you earned the money as a sole proprietor, an independent contractor, or through a partnership. The $400 figure is a filing trigger, not a rate threshold: once you cross it, the full 15.3% self-employment tax (12.4% for Social Security plus 2.9% for Medicare) is applied to 92.35% of your net earnings. Church employee income is handled under a separate, lower threshold and is excluded from this $400 test. If your earnings fall below $400 and you did not have church employee income of $108.28 or more, you do not owe self-employment tax and do not file Schedule SE, though you still report the income on your return.
Who must pay self-employment tax. You must pay SE tax and file Schedule SE (Form 1040) if either of the fol- lowing applies. 1. Your net earnings from self-employment (excluding church employee income) were $400 or more. 2. You had church employee income of $108.28 or more.
Publication 334 (2016), Tax Guide for Small Business (IRS)
Church employee income is taxed from $108.28
Church employees receive special treatment because their employers are generally churches or church-controlled organizations that are not required to pay the employer share of Social Security and Medicare taxes. As a result, if your church employee income reached $108.28 or more in 2016, you must file Schedule SE and pay the full 15.3% self-employment tax yourself. This threshold is far lower than the $400 threshold that applies to ordinary self-employment earnings, which means people who might not consider themselves self-employed at all can still owe the tax. Church employee income is excluded from the $400 self-employment earnings test, so the two thresholds are tracked separately: crossing either one requires filing Schedule SE.
Who must pay self-employment tax. You must pay SE tax and file Schedule SE (Form 1040) if either of the fol- lowing applies. 1. Your net earnings from self-employment (excluding church employee income) were $400 or more. 2. You had church employee income of $108.28 or more.
Publication 334 (2016), Tax Guide for Small Business (IRS)
Age and drawing benefits do not exempt you
A common misconception is that reaching retirement age or already drawing Social Security or Medicare benefits excuses you from self-employment tax. The IRS states plainly that the SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. The obligation is tied to current-year earnings from self-employment, not to your age or your benefit status. So any retiree who earns self-employment income - for example, from consulting, freelance work, or a business activity - still owes SE tax on those earnings once the applicable threshold is met. The tax is still computed at the 15.3% rate - 12.4% for Social Security and 2.9% for Medicare - applied to 92.35% of net earnings. Note that if you are already receiving Social Security benefits, those benefits are not themselves reduced or affected by new SE tax you pay; the tax is simply an additional liability on the new self-employment work.
CAUTION !CAUTION ! The SE tax rules apply no matter how old you are and even if you are already receiving social secur- ity or Medicare benefits.
Publication 334 (2016), Tax Guide for Small Business (IRS)
Half the tax comes back as an adjustment to income
Self-employed people pay both the employee and employer portions of Social Security and Medicare taxes, which together make up the 15.3% rate (12.4% for Social Security plus 2.9% for Medicare). To reduce the burden of paying what would otherwise be a full employer share on top of an employee share, the tax code allows you to deduct one-half of your self-employment tax as an adjustment to income on your Form 1040. This adjustment is taken on line 27 of Form 1040 and reduces your adjusted gross income directly, whether or not you itemize deductions. The deduction lowers your income tax liability, though it does not reduce the self-employment tax itself. It effectively treats half of the tax as if it were the employer's share, mirroring how employees only bear half of FICA while their employer pays the other half.
Deduct one-half of your SE tax as an adjustment to income on line 27 of Form 1040.
Publication 334 (2016), Tax Guide for Small Business (IRS)
Only 92.35% of net earnings is actually taxed
The self-employment tax is not applied to your full net earnings from self-employment. Instead, the tax is calculated on 92.35% of those earnings. In other words, you multiply your net profit by 0.9235 to arrive at the amount that is actually subject to the 15.3% combined rate (12.4% for Social Security and 2.9% for Medicare). This reduction exists because self-employed people pay both the employee and employer shares of the tax, and the 92.35% figure approximates the effect of allowing a deduction for the employer's share before the tax is computed. The result is reported on Schedule SE: on line 4 of Short Schedule SE or line 4a of Long Schedule SE. Although the percentage is fixed, it meaningfully lowers the base on which the tax is figured for every taxpayer who files Schedule SE.
To figure net earnings using the regular method, multiply your self-employment earnings by 92.35% (0.9235).
Publication 334 (2016), Tax Guide for Small Business (IRS)
Nobody withholds it, so you pay it quarterly
Unlike wages from an employer, self-employment income is not subject to payroll withholding. No one is deducting Social Security, Medicare, or income tax from your self-employment checks as you earn them. As a result, if you expect to owe $1,000 or more in total tax when you file your return, including self-employment tax, you generally must make estimated tax payments during the year using Form 1040-ES. These payments are due quarterly. Failing to pay enough through withholding or estimated payments can trigger an underpayment penalty, which the IRS may calculate for you using Form 2210. Payments can be made electronically through the Electronic Federal Tax Payment System, by Direct Pay, by credit or debit card, or by mailing a check with a Form 1040-ES voucher. You may also credit an overpayment from a prior year return toward your current estimated tax.
You generally have to make estimated tax pay- ments if you expect to owe taxes, including self-employ- ment tax (discussed later), of $1,000 or more when you file your return.
Publication 334 (2016), Tax Guide for Small Business (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Publication 334 (2016), Tax Guide for Small Business (IRS)
- Rate
SE tax rate. The SE tax rate on net earnings is 15.3% (12.4% social security tax plus 2.9% Medicare tax).
SE tax rate. The SE tax rate on net earnings is 15.3% (12.4% social security tax plus 2.9% Medicare tax).
- Medicare rate
SE tax rate. The SE tax rate on net earnings is 15.3% (12.4% social security tax plus 2.9% Medicare tax).
To figure net earnings using the regular method, multiply your self-employment earnings by 92.35% (0.9235).