Updated 30 March 2026
Medicare Tax for the Self-Employed
When you work for yourself, you are both the employee and the employer. That means you pay the full 2.9% Medicare tax, but you also get to deduct half of it. Here is exactly how to calculate it.
2.9%
Total Medicare Rate
92.35%
Taxable SE Income Factor
1.45%
Deductible Portion
+0.9%
Surtax Over Threshold
How to Calculate Your Medicare SE Tax
Follow these five steps to determine your Medicare self-employment tax for 2026.
Start with net self-employment income
This is your net profit from Schedule C (or Schedule K-1 for partnerships). Subtract all ordinary and necessary business expenses from gross income.
Gross revenue $200,000 - expenses $40,000 = $160,000 net SE income
Multiply by 92.35%
The IRS reduces your self-employment income by 7.65% before calculating SE tax. This adjustment accounts for the fact that employers do not pay FICA on the employer share of FICA. It is calculated as net SE income x 0.9235.
$160,000 x 0.9235 = $147,760 taxable SE income
Calculate Medicare portion of SE tax (2.9%)
Multiply the adjusted SE income by 2.9%. This is the combined employee (1.45%) and employer (1.45%) Medicare tax.
$147,760 x 0.029 = $4,285.04 Medicare SE tax
Check for Additional Medicare Tax (0.9%)
If your SE income exceeds the threshold for your filing status ($200,000 single, $250,000 MFJ), apply an additional 0.9% on the excess. Use the full net SE income (not the 92.35% figure) for this calculation.
If single with $250,000 net SE income: 0.9% x ($250K - $200K) = $450 additional
Deduct the employer-equivalent portion
You can deduct half of your total SE tax (the employer-equivalent share) as an adjustment to income on Form 1040. This reduces your adjusted gross income and therefore your income tax, but it does not reduce your SE tax itself.
$4,285.04 / 2 = $2,142.52 deduction on Form 1040 line 15
Employee vs. Self-Employed Medicare Tax
How the same tax works differently depending on your employment status.
| Item | Employee (W-2) | Self-Employed |
|---|---|---|
| Medicare tax rate | 1.45% | 2.9% (both shares) |
| Who pays it | Split: you 1.45%, employer 1.45% | You pay the full 2.9% |
| Additional Medicare Tax | 0.9% over $200K (withheld by employer) | 0.9% over threshold (paid on return) |
| Deduction for employer share | N/A (employer pays directly) | 1.45% deductible on Form 1040 |
| Wage base limit | None for Medicare | None for Medicare |
| Reporting form | W-2 (Box 5: Medicare wages, Box 6: Medicare withheld) | Schedule SE + Form 1040 |
| Quarterly payments | Withheld each paycheck | Estimated payments (1040-ES) |
Value of the SE Tax Deduction
The employer-equivalent portion (1.45%) reduces your adjusted gross income, saving you income tax at your marginal rate.
| Net SE Income | Medicare SE Tax | Deduction (50%) | Income Tax Saved |
|---|---|---|---|
| $80,000 | $2,134 | $1,067 | ~$235 to $352 |
| $150,000 | $4,001 | $2,001 | ~$440 to $640 |
| $250,000 | $6,668 + $450 AMT | $3,334 | ~$800 to $1,067 |
| $500,000 | $13,337 + $2,700 AMT | $6,669 | ~$2,334 to $2,468 |
AMT = Additional Medicare Tax. Deduction amounts use the 92.35% adjustment. Income tax saved is approximate based on 2026 marginal tax brackets.
Quarterly Estimated Payments
When to Pay
Self-employed taxpayers must make quarterly estimated tax payments using Form 1040-ES if they expect to owe $1,000 or more in total tax. The 2026 due dates are:
- Q1: April 15, 2026
- Q2: June 15, 2026
- Q3: September 15, 2026
- Q4: January 15, 2027
How to Calculate Quarterly Amount
Your quarterly payment should cover both income tax and self-employment tax (including Medicare). The safe harbor rule: pay at least 100% of last year's total tax liability (110% if AGI exceeded $150,000) to avoid underpayment penalties.
A common approach: estimate your annual SE income, calculate the total SE tax and income tax, divide by 4, and pay that amount each quarter.
The Additional Medicare Tax should be included in your estimated payments if your income is expected to exceed the threshold. The IRS does not distinguish between regular and additional Medicare tax in estimated payments.
Common Mistakes to Avoid
Forgetting the 92.35% adjustment
Always multiply net SE income by 0.9235 before calculating the 2.9% tax. This is required by the IRS and reduces your tax slightly.
Missing the deduction for half of SE tax
The employer-equivalent portion (half of SE tax) is deductible on Form 1040 Line 15. This is an above-the-line deduction, meaning it reduces your AGI even if you take the standard deduction.
Not making quarterly estimated payments
If you owe $1,000 or more, you are required to make quarterly payments. Missing them results in underpayment penalties, calculated as interest on the shortfall for each quarter.
Using the wrong threshold for Additional Medicare Tax
The threshold depends on filing status ($200K single, $250K MFJ, $125K MFS). If you also have W-2 wages, reduce the SE threshold by your W-2 wages to avoid double-counting.
Confusing Medicare tax with Social Security tax caps
Social Security tax has a $176,100 wage base cap in 2026. Medicare tax has no cap. All SE income, regardless of amount, is subject to the 2.9% Medicare tax.