Definition
The 15.3% tax self-employed workers pay to cover both halves of Social Security and Medicare (employees split it with their employer). It applies to net self-employment earnings on top of regular income tax.
Why it matters
It is the number that shocks first-year freelancers: profit is taxed roughly 15% before income tax even starts. Pricing, quarterly savings, and retirement contributions all have to account for it.
Example
A freelancer netting $60,000 owes about $8,478 of self-employment tax (15.3% of 92.35% of net earnings), half of which is deductible from income, before ordinary income tax is calculated.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.