--- title: "Self-employment tax: Definition and Sources | Tax Glossary" description: "Self-employment tax is the Social Security and Medicare tax that people who work for themselves pay on their net earnings." url: https://wallacecpa.multisites.ai/glossary/self-employment-tax publisher: Wallace CPA phone: +1-877-682-1171 quote: https://wallacecpa.multisites.ai/contact --- Federal tax # Self-employment tax Self-employment tax is the Social Security and Medicare tax that people who work for themselves pay on their net earnings. Employees split Social Security and Medicare tax with their employer. Self-employed people pay both halves. The IRS lists the self-employment rate as 15.3 percent, made of 12.4 percent for Social Security and 2.9 percent for Medicare. The Social Security part stops at a yearly wage base, which the IRS changes each year. This tax is separate from income tax. Sole proprietors and partners pay it, so they often send [estimated tax payments](https://wallacecpa.multisites.ai/glossary/estimated-tax-payments). An [S corporation](https://wallacecpa.multisites.ai/glossary/s-corporation) owner pays payroll tax on a salary instead, which must be [reasonable](https://wallacecpa.multisites.ai/glossary/reasonable-compensation). The [S corp, LLC and sole proprietor guide](https://wallacecpa.multisites.ai/guides/s-corp-llc-sole-proprietor-texas) compares the choices. [Wallace CPA can helpTax planning](https://wallacecpa.multisites.ai/services/tax-planning) ## Related terms - [Estimated tax payments](https://wallacecpa.multisites.ai/glossary/estimated-tax-payments) - [S corporation](https://wallacecpa.multisites.ai/glossary/s-corporation) - [Reasonable compensation](https://wallacecpa.multisites.ai/glossary/reasonable-compensation) - [Limited liability company (LLC)](https://wallacecpa.multisites.ai/glossary/limited-liability-company-llc) ## Sources 1. [IRS: Self-employment tax (Social Security and Medicare taxes)](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes) ## Talk to Wallace CPA Call the Southlake office and say what you need: a return, an IRS letter, your books or a new business. Have the notice or last year's return nearby if you have one. [Call (877) 682-1171](tel:+1-877-682-1171)[Send a message](https://wallacecpa.multisites.ai/contact) 180 State Street, Suite 225, Southlake, TX 76092