8724 / What is the self-employment tax? Who is liable for paying it?

An individual whose net earnings from self-employment as an independent contractor equal $400 or more for the taxable year must pay the self-employment tax.¹

In 2025, an individual who is liable for the self-employment tax must file a Schedule SE and pay Social Security taxes on up to $176,100 of self-employment income. The hospital insurance tax is imposed on all of a taxpayer’s self-employment income.

Despite this, an above-the-line deduction is permitted for one-half of the self-employment tax paid by an individual and attributable to a trade or business carried on by the individual as an independent contractor (not as an employee).² If the individual also works in covered employment as an employee, his self-employment income (subject to the self-employment tax) is only the difference, if any, between his “wages” as an employee and the maximum Social Security earnings base.

See Q 8570 for a detailed discussion of the Social Security tax as it applies to self-employed individuals and Q 8572 for a discussion of estimated tax payments.