What is the self employment tax?

When you work most jobs, your earnings are taxed at a 6.2% rate for Social Security and 1.45% for Medicare. Additionally, your employer also contributes the same amount -- a total of 7.65% of your wages. However, when you're self employed, you are the employer and the employee. Therefore, you're responsible for paying all of the Social Security and Medicare taxes, which adds up to 15.3% (12.4% for Social Security and 2.9% for Medicare).

For tax year 2023, 12.4% tax applies to the first $160,200 of earnings and the 2.9% applies to all earnings.