When you work for yourself, you're the employer and the employee — and the IRS wants both halves of FICA. That's the single biggest surprise for new freelancers. Here's how self-employment (SECA) tax works, what you can deduct, and how to avoid penalties.
What Is SECA Tax and How Is It Calculated?
SECA (Self-Employment Contributions Act) is the self-employed version of FICA. You pay **15. 3%** on **92.
35%** of your net self-employment income. That 15. 3% breaks into **12.
4% for Social Security** (up to the wage base of $176,100 in 2026) and **2. 9% for Medicare** (no cap). The 92.
35% multiplier accounts for the fact that you can deduct half the tax.
Employees pay 7.65% of their wages and their employer pays the other 7.65%. Self-employed individuals pay the full 15.3% — but you can deduct half (7.65% of your SE earnings) as an above-the-line adjustment on Form 1040. This deduction reduces your income tax, not your SE tax itself.
Self-Employed vs. Employee — Real Dollar Comparison
| Factor | Employee ($100K) | Self-Employed ($100K profit) |
|---|---|---|
| FICA/SECA tax | $7,650 (half paid by employer) | $14,129 (full 15.3%) |
| Deductible portion | $0 | $7,064 (deductible half) |
| Health insurance | $5,000–$15,000 (employer subsidized) | You pay full cost |
| Paid time off | 2–4 weeks paid | $0 — every day off = lost income |
| 401(k) match | 3–6% of salary | You fund both sides |
What Expenses Reduce Your Self-Employment Tax?
Your SE tax is based on net profit — revenue minus deductible business expenses. Every legitimate deduction reduces your SE tax. Here are the most common deductions available to self-employed individuals.
- **Home office deduction** — $5/sq ft simplified method (up to 300 sq ft) or actual expense method
- **Health insurance premiums** — deducted on Form 1040, not Schedule C
- **SEP IRA / Solo 401(k)** — contribute up to 25% of net earnings, reducing both income and SE tax
- **Business use of vehicle** — $0.67/mile standard mileage rate for 2026
- **QBI deduction** — up to 20% of qualified business income under Section 199A
Know Exactly What You Owe Before Tax Day
Use our free Self-Employment Tax Calculator to see your full SECA breakdown, deductible half, and QBI deduction savings.