This article is for general informational purposes and doesn’t constitute tax, legal, or accounting advice. Self-employment tax rates, the Social Security wage base, estimated payment deadlines, and New York rules change from year to year, and how they apply depends on your business structure and circumstances. Confirm current details with the IRS, the New York State Department of Taxation and Finance, or a qualified professional before acting on them.
The first tax bill after going out on your own can be a real shock. You worked hard, the income felt good, and then April showed up with a number nobody warned you about.
For many people, self-employment tax is a big part of that surprise. This guide explains what it is, how it’s figured out, and how to plan for it if you work for yourself in Buffalo.
It’s written by the team at KD Accounting & Tax, based on the questions we hear from freelancers, contractors, and small business owners every tax season.
Self-Employment Tax at a Glance
Self-employment tax is 15.3% of your net earnings (12.4% Social Security + 2.9% Medicare), and it’s owed on top of income tax once net self-employment earnings reach $400 for the year. It’s calculated on Schedule SE using 92.35% of your Schedule C profit.
Half of it is deductible against income tax, ordinary business expenses reduce it, and you’ll generally need to pay it through quarterly estimated payments. New York doesn’t add a separate self-employment tax, but state income tax on the same profit still applies.
What Is Self-Employment Tax?
When you work for an employer, Social Security and Medicare taxes come out of each paycheck. Your employer pays half, and you pay half. When you work for yourself, you’re both the employer and the employee, so you pay both halves.
That’s what self-employment tax is. The rate is 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. It’s separate from regular income tax. You can owe both on the same dollar of profit, which surprises a lot of people.
You generally owe it once your net earnings from self-employment reach $400 for the year. That’s a low bar, so even a side job can trigger it.
Who Has to Pay It?
Sole proprietors, independent contractors, freelancers, gig workers, and partners in a partnership usually pay self-employment taxes. So do single-member LLC owners who haven’t elected to be taxed as a corporation. If you drive for a delivery app, cut hair on a chair rental, do remodeling work, or run an online shop from your spare bedroom, you’re likely in this group. (Contractors in the trades have a few extra wrinkles around worker classification; our guide to accounting for contractors in Buffalo covers them.)
Getting a 1099-NEC doesn’t create the tax, and not getting one doesn’t erase it. A client may not be required to send you a 1099-NEC for every payment, but that doesn’t mean the income can be left off your return. Whether you get a tax form or not, you still need to keep track of what you earned and report it.
How Self-Employment Tax Is Calculated
The calculation looks complicated at first, but the basic idea is pretty straightforward. You start with your net profit, which is your business income minus your business expenses. For a sole proprietor, that profit generally goes on Schedule C with your federal return.
Next, you multiply your net profit by 92.35%. The IRS uses that figure to account for the fact that an employer’s half of the tax is normally not counted as wages. Then you multiply the result by 15.3%. You report all of this on Schedule SE.
Here’s an example. Say your net profit is $60,000. Multiply by 92.35%, and you get $55,410. Multiply that by 15.3%, and your self-employment tax is about $8,478. That’s on top of your income tax.
There’s one relief built in. You can deduct half of your self-employment tax when you figure your income tax. In the example, that’s roughly $4,239 off your taxable income. It doesn’t reduce the self-employment tax itself, but it does soften the blow.
Quick Questions: The Math
Why 92.35% and not 100%?
An employee’s wages don’t include the employer’s share of Social Security and Medicare tax. The 92.35% multiplier (100% minus half of 15.3%) puts self-employed earnings on roughly the same footing before the tax is applied.
Does the half-tax deduction come off the self-employment tax?
No. It reduces the income your regular income tax is figured on, through Schedule 1 of Form 1040. The self-employment tax on Schedule SE stays the same.
The Social Security Limit and the Extra Medicare Tax
The Social Security portion has a yearly cap. In 2026, the Social Security wage base is $184,500. Once your earnings go above that limit, the 12.4% Social Security portion stops applying, but the 2.9% Medicare portion continues.
Higher earners may also owe an Additional Medicare Tax of 0.9%. It applies to income above $200,000 for single filers and $250,000 for married couples filing jointly. Most of the people we work with never reach that level, but it’s good to know it exists as your business grows.
Estimated Quarterly Taxes: Paying as You Go
Because nobody withholds tax from your business income, the IRS expects you to pay as you go. If you expect to owe $1,000 or more when you file, you’ll generally need to make estimated payments using Form 1040-ES, and those payments need to cover both your income tax and your self-employment tax. For 2026, the due dates are April 15, June 15, September 15, and January 15, 2027. New York State expects its own estimated payments on the same schedule.
The safe-harbor rules, penalties, and how to calculate each installment are covered in our separate guide to quarterly estimated taxes. The one habit worth starting today: keep a separate savings account just for taxes and move part of every payment you receive into it. Many people start by setting aside 25% to 30% of their profit, then adjust once they have a better idea of what they actually owe. It keeps tax money from disappearing into groceries and gas.
Not Sure What to Set Aside Each Quarter?
KD Accounting & Tax helps Buffalo freelancers and business owners figure both the income tax and self-employment tax pieces of their estimated payments, so the number isn’t a guess.
Explore Tax Planning Services Call (716) 589-2665Which Deductions Actually Lower Self-Employment Tax
This is a distinction that trips people up. Since self-employment tax is based on your net earnings, ordinary business expenses on Schedule C, such as supplies, software, business insurance, professional fees, advertising, and business mileage, reduce both your income tax and your self-employment tax. The same goes for the home office deduction if you work from home and use part of it regularly and exclusively for business.
Other deductions only reduce income tax. Health insurance premiums, retirement contributions to a SEP IRA or Solo 401(k), and the qualified business income deduction all lower your taxable income, but none of them touch the self-employment tax calculation on Schedule SE. They’re still worth claiming; just don’t expect them to shrink the 15.3%.
For the full list of what you can write off and the records you need to support it, see our guide to small business tax deductions in Buffalo. And if your business and personal spending share one account, read how mixing personal and business expenses affects your tax filing before you try to claim any of them.
Rental Income and Self-Employment Tax
This comes up fairly often for Buffalo property owners, especially people who have a duplex or another rental unit. In many cases, income from an ordinary long-term rental isn’t subject to self-employment tax, although the details of the rental activity matter. It’s still taxable income, but you report it on Schedule E rather than Schedule C.
There are exceptions. If you provide substantial services to tenants, like hotel-style daily cleaning or meals, the income can be treated differently. Short-term rentals can be a different story, especially when you’re providing services that go beyond simply renting out the property. If you’re unsure which side of the line you’re on, ask a tax professional before you file, not after.
Does Business Structure Change the Tax?
Sometimes, yes. An LLC by itself doesn’t change how you’re taxed. A single-member LLC is still treated as a sole proprietorship by default, so profit flows to your personal return and self-employment tax applies.
An S corporation is different. With an S corp election, you pay yourself a reasonable salary through payroll, and the payroll taxes apply to that salary. Remaining profit can be taken as distributions, which aren’t subject to self-employment tax. That can lead to real savings when profit is high enough.
But it’s not free money. You have to run payroll, file additional returns, and pay a salary the IRS considers reasonable for the work you do. For lower profits, the added costs and paperwork can outweigh the savings.
There isn’t one magic profit number where an S corp suddenly becomes the right choice. It’s better to run your actual numbers and compare the tax savings with the extra payroll, filing, and accounting costs. If you’re still deciding how to set up, our business registration services page explains the options.
Quick Questions: Structure and Side Income
I have a W-2 job and a side business. Do I still owe self-employment tax?
Yes, on the side business profit once it reaches $400 for the year. Your W-2 wages count toward the Social Security wage base, so if your combined earnings pass $184,500 in 2026, only the Medicare portion applies to the excess.
Can my spouse and I split one business?
In some cases a married couple can elect to treat a jointly owned business as a qualified joint venture, with each spouse filing their own Schedule C and Schedule SE. It affects each person’s Social Security record, so it’s worth a conversation before you choose.
New York and Buffalo Considerations
Federal self-employment tax is only one part of what you may owe.
You’ll also owe New York State income tax on your business profit, and you may need to make estimated payments using Form IT-2105 if you expect to owe enough tax.
New York doesn’t have its own separate self-employment tax, but the state income tax on your profit is real, so plan for it in your savings.
If you operate a business in Buffalo, you may also have sales tax responsibilities, depending on what you sell. New York requires certain sellers to register and collect sales tax, and that’s a separate filing from your income tax return. Depending on the type of work you do, you may also have local licensing or registration requirements to deal with. Check with the city and the state for your specific type of work.
Common Mistakes We See
A few mistakes show up more often than you’d think. The first is skipping estimated payments in the first year, then facing a large bill plus penalties. The second is mixing personal and business spending in one bank account, which makes bookkeeping painful and deductions hard to prove. The third is forgetting to track income from small side jobs, especially payments through apps.
Another common mistake is looking at last year’s refund and assuming this year will work out the same way. As an employee, taxes were coming out of your paycheck before you ever saw the money. When you’re self-employed, you have to take care of that part yourself.
Finally, some people wait until March to gather records. Sorting through twelve months of paperwork at once is stressful, and it’s easy to miss deductions. Our year-end tax planning checklist walks through what to review before December 31.
How to Get Organized
You don’t need fancy systems. Open a separate business checking account. Record income and expenses every week or two, using a spreadsheet or simple bookkeeping software. Save receipts digitally. Set aside tax money with every payment you receive. And mark those four payment dates on your calendar.
If your income goes up and down during the year, take a look at your numbers each quarter and adjust your payments if needed. If you’d rather not keep the books yourself, bookkeeping services in Buffalo keep income and expenses categorized as they happen.
When to Bring in a Professional
Plenty of people handle a simple Schedule C on their own. But once you have employees, several income sources, rental property, or an S corp decision on the table, getting another set of eyes on the numbers can be worthwhile.
At KD Accounting & Tax, we’d rather walk through your numbers early than untangle a mess after a notice arrives. Ask any preparer about their credentials, how they handle your data, and who signs the return. Real answers to those questions are a good sign.
Get Your Self-Employed Return Done Right
From Schedule C and Schedule SE to New York estimated payments, the KD Accounting & Tax team in Buffalo can help you file with confidence.
See Tax Filing Services Call (716) 589-2665Frequently Asked Questions
The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of your net self-employment earnings. Social Security stops at an annual wage limit, while Medicare continues on all earnings.
You generally owe it when your net earnings from self-employment are $400 or more for the year. That includes side work, so even part-time income can create the tax. You report it on Schedule SE with your return.
Yes. You can deduct half of your self-employment tax when calculating your income tax. This lowers your taxable income, but it doesn’t reduce the self-employment tax itself. The deduction is claimed on your Form 1040 through Schedule 1.
Generally, yes, if you expect to owe $1,000 or more when you file. You pay using Form 1040-ES. Paying at least 90% of this year’s tax or 100% of last year’s usually avoids penalties, with exceptions for higher earners. See our quarterly estimated taxes guide for the details.
Typically not. Income from ordinary long-term rentals is usually reported on Schedule E and isn’t subject to self-employment tax. Exceptions can apply if you provide substantial services to tenants, so check your situation before filing.
Not by itself. A single-member LLC is normally taxed like a sole proprietorship, so the tax still applies. An S corporation election may lower it in some cases, but it adds payroll requirements and costs.
Yes. All self-employment income is taxable whether or not a client sends a form. Keep your own records of every payment, including cash and app payments, and report the full amount.