Self-Employment Tax and Quarterly Estimates

An employee splits Social Security and Medicare with the employer. Someone who works for themselves is both, and pays both shares.

Who is self-employed

For tax purposes you’re self-employed if you’re a sole proprietor (including an independent contractor), a partner in a partnership, a member of a single-member LLC, or otherwise in business for yourself ¹. That includes a farm reported on Schedule F, a side business selling eggs, firewood, or furniture, and 1099 contract work. You usually owe self-employment (SE) tax once net earnings reach $400 for the year, and you owe it even if you already collect Social Security ¹.

Both halves

The SE tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare, the employee’s and employer’s shares combined ². Two adjustments soften it:

• It applies to 92.35% of net earnings, not 100% ¹. (The 7.65% knocked off mirrors the fact that an employee never pays tax on the employer’s share.)
• You deduct half of the SE tax in figuring adjusted gross income. That lowers your income tax, but not the SE tax itself ².

The Social Security part stops at the wage base, $184,500 in 2026; the Medicare part applies to all net earnings ^{3 1}. If you also have a job, your wages use up the wage base first ².

Worked through for $40,000 of net profit:

That $5,651.82 comes on top of regular income tax on the profit. It’s easy to forget in a first year of self-employment.

Paying as you go

Tax is due as income is earned, and nobody withholds from self-employment income, so you pay estimated tax instead. Individuals generally must make estimated payments if they expect to owe $1,000 or more in federal tax when they file ⁴. Estimated payments cover income tax and SE tax together ⁴.

The year has four payment periods. For 2026 the due dates are April 15, June 15, and September 15, 2026, and January 15, 2027. You can skip the January payment if you file and pay in full by February 1, 2027 ⁵. Paying more often than quarterly is fine as long as each period’s total is covered ⁴.

If you also have a job, there’s an easier route: raise your W-4 withholding (Step 4c) to cover the business income and skip estimates entirely ⁴.

The safe harbors

You generally avoid an underpayment penalty if you owe less than $1,000 at filing, or if your withholding and on-time estimates add up to at least the smaller of ⁴:

• 90% of this year’s tax, or
• 100% of last year’s tax, or 110% if last year’s AGI was over $150,000 ⁵.

The prior-year rule is the easy one: divide last year’s total tax by four and pay that each quarter. Even if business booms and you owe more in April, there’s no penalty. Note that a late payment can be penalized even if you end up due a refund ⁴.

Farmers get a simpler rule

If at least two-thirds of your gross income comes from farming (or fishing), you can skip the quarterly schedule: either pay all your estimated tax by January 15 or file your return and pay everything by March 1 ⁵. Farmers also use 66⅔% in place of the 90% test, and the 110% rule doesn’t apply to them ⁵.

Wisconsin estimates

Wisconsin has its own version, Form 1-ES. You must pay Wisconsin estimated tax if you expect to owe at least $500 after withholding and credits, with safe harbors of 90% of this year’s tax or 100% of last year’s. The dates match the federal ones, and farmers and fishers get the same pay-by-January or file-by-March option. Payments can be made free online through the Department of Revenue ⁶.

Try it

If you have any self-employment income, estimate this year’s net profit and run it through the table above. Add your expected income tax, compare the total to last year’s tax, and set four calendar reminders for the due dates with a quarter of the safe-harbor amount on each.