What is self-employment tax?
Updated: Jun 9, 2025
You might be wondering why you have to pay self-employment tax.
This is a result of having a sole proprietorship, single member LLC (taxed as a disregarded entity), or partnership. Self-employment tax is not generally applicable to entities taxed as a S-corp.
This tax is calculated on your net earnings (income minus allowable expenses). The tax is due on 92.35% of your net earnings which is then multiplied by the self-employment tax rate (in general about 15%). As a "self-employed" individual, you are responsible for the employee and employer portions of Social Security and Medicare.
There is a credit available for a portion of the self-employment tax. This helps with this burden of this tax. Rental income is generally not applicable to self-employment tax.
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