Self-employment tax
The Social Security and Medicare tax you pay on your own business profit. You cover both the employee and the employer half.
Work for yourself as a sole proprietor, a single-member LLC owner or a partner, and self-employment tax is how you pay into Social Security and Medicare. On a payroll job the employer covers half. Here you cover the whole thing.
The rates come from IRS Topic 554: 12.4% for Social Security plus 2.9% for Medicare, or 15.3%, charged on 92.35% of net earnings from self-employment. It kicks in at $400 of net earnings for the year. Social Security stops at the 2026 wage base of $184,500, while Medicare has no cap at all.
Schedule SE is where you figure it. It's paid with your Form 1040, and for most people that means quarterly estimated payments through the year. When you work out adjusted gross income, half of it comes off.
A worked number: $100,000 of profit in 2026 means $14,129.55 of self-employment tax. Put that business in an LLC taxed as an S corp and the profit escapes it. The owner pays payroll tax on a salary instead, and that gap is where the S corp saving comes from.