Updated October 24, 2026. Quick answer: Tax Topic 554 is the IRS page on self-employment tax. It says sole proprietors, partners and others in business for themselves usually pay it, that the rate is set as a percentage of net earnings, and that Schedule SE is used to compute it.
Quick reference
| Item | What the IRS topic says |
|---|---|
| Who is self-employed | “You’re self-employed for this purpose if you’re a sole proprietor (including an independent contractor), a partner in a partnership” |
| When it applies | “You usually must pay self-employment tax if you had net earnings from self-employment of $400 or more.” |
| Amount subject to the tax | “Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment.” |
| The rate | “This rate consists of 12.4% for Social Security and 2.9% for Medicare taxes.” |
| The form | “Compute self-employment tax on Schedule SE (Form 1040) (attach Schedule 2 PDF).” |
| Deduction | “you can deduct one-half of the self-employment tax” |
Who owes self-employment tax
The topic starts by defining who counts. The IRS topic says “You’re self-employed for this purpose if you’re a sole proprietor (including an independent contractor), a partner in a partnership” It adds “The term sole proprietor also includes the member of a single member LLC that’s disregarded for federal income tax purposes and a member of a qualified joint venture.”
On the threshold, it says “You usually must pay self-employment tax if you had net earnings from self-employment of $400 or more.” Net earnings are explained this way: “You calculate net earnings by subtracting ordinary and necessary trade or business expenses from the gross income you derived from your trade or business.”
Receiving benefits does not remove the tax. The topic says “You can be liable for paying self-employment tax even if you currently receive Social Security benefits.” Our page on self-employment tax goes through the pieces.
The rate, the extra Medicare tax and the optional methods
On the rate, the topic says “The law sets the self-employment tax rate as a percentage of your net earnings from self-employment.” It continues: “This rate consists of 12.4% for Social Security and 2.9% for Medicare taxes.” It also says “All of your net earnings are subject to the Medicare tax.”
A further tax is covered under its own heading. The topic says “Additional Medicare tax applies to self-employment income above a threshold.” The amounts it gives are “The threshold amounts are $250,000 for a married individual filing a joint return, $125,000 for a married individual filing a separate return, and $200,000 for all others.” See Additional Medicare tax and Form 8959.
The topic also mentions a choice for low or negative income: “If you had a loss or small amount of income from your self-employment, it may be to your benefit to use one of the two optional methods to compute your net earnings from self-employment.”
Reporting it on your return
For the form, the topic says “Compute self-employment tax on Schedule SE (Form 1040) (attach Schedule 2 PDF).” It then explains the deduction: “When figuring your adjusted gross income on Form 1040, Form 1040-SR, or Form 1040-NR, you can deduct one-half of the self-employment tax.”
The topic also says why the form matters beyond tax: “The Social Security Administration uses the information from Schedule SE to compute your benefits under the Social Security program.” Our pages on Schedule 2 line 4 and Schedule 1 lines 15 and 16 show where the figures go.
A short section covers church workers. It says “you must pay self-employment tax if the church or qualified church-controlled organization paid you more than $108.28, unless you are personally exempt from self-employment tax.”
Where this comes from
This page describes the IRS page titled Topic no. 554, Self-employment tax, as served on irs.gov on October 24, 2026. The IRS page shows that it was last reviewed or updated on 24 Sep 2026. The IRS can change a topic after we read it, and the IRS page controls. General information, not tax or legal advice.
Common mistakes
- Thinking the tax applies only to full time business owners. The topic includes “an independent contractor”
- Applying the rate to gross receipts. The topic says it is a percentage of “net earnings from self-employment”
- Assuming Social Security benefits end the tax. The topic says you can owe it “even if you currently receive Social Security benefits”
- Forgetting the deduction. The topic says “you can deduct one-half of the self-employment tax”
- Missing the extra Medicare tax. The topic says it “applies to self-employment income above a threshold”
Related: IRS tax topics by number, Self-employment tax explained, Schedule SE lines 5 to 13, Schedule 2 line 4: self-employment tax, Form 8959, and Quarterly estimated taxes for the first year self-employed.
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Answer againSources
- IRS, Topic no. 554, Self-employment tax (irs.gov): https://www.irs.gov/taxtopics/tc554
- IRS, Tax topics index (irs.gov): https://www.irs.gov/taxtopics
Read from the IRS pages linked above on October 24, 2026. General information, not tax or legal advice. The IRS topic page and the instructions for your own form control, and your own facts decide the outcome.