IRS Schedule SE (Self-Employment Tax) is used by self-employed individuals to calculate and report their self-employment tax on Form 1040 (US Individual Income Tax Return). Self-employment taxes under the Federal Insurance Contributions Act (FICA) consist of the employee and employer portion of Social Security and Medicare taxes.

Who Must Pay Self-Employment Taxes?
  • Sole Proprietors. If a taxpayer has a sole proprietorship and includes Schedule C (Profit or Loss From Business) with their Form 1040, they pay self-employment taxes on those net earnings.
  • Partners in a Partnership. If a taxpayer is a partner in a partnership, and the partner materially participates in the operations of a partnership, the taxpayer’s allocation of ordinary income on Schedule K-1 and guaranteed payments, if any, are subject to self-employment taxes.
Relevant Parts of Schedule SE on Form 1040

Part I – Self-Employment Tax

  • Net farm profit or loss from Schedule F (Profit or Loss From Farming)
  • Net profit or loss from Schedule C (Profit or Loss From Business)
  • Net profit from a partnership that is subject to self-employment taxes. The taxable amount is generally reported in Box 14A on Schedule K-1 (Form 1065)

Part II – Optional Methods to Figure Net Earnings

A taxpayer can use an optional method to calculate their earnings subject to self-employment taxes. The optional methods calculate your earnings subject to SE taxes as a percentage of your gross income rather than net income.

Key Points to Remember About Schedule SE:

Social Security and Medicare Tax: Self-employment tax covers both Social Security (12.4%) and Medicare (2.9%) taxes. The combined tax rate of 15.3% applies to all income up to the relevant threshold for the given tax year.

Income Threshold: Only net earnings of $400 or more are subject to self-employment tax. For the 2024 tax year, the 15.3% tax applies to all earnings up to the limit of $168,600 (For 2023, the limit was $160,200). Earnings in excess of the yearly limits are only subject to the Medicare taxes of 2.9% and are no longer subject to the Social Security taxes of 12.4%.

Deduction for Self-Employment Tax: A self-employed taxpayer can deduct the employer-equivalent portion of self-employment tax on Form 1040. The deduction for one-half of the self-employment tax is ultimately reported on Schedule 1 (Additional Income & Adjustments).

Video Tutorials for Form 1120-S and Schedule K-1

Please view our videos below for tutorials on how to complete Schedule SE for various scenarios:

Additional Information

Taxpayers can find more information in the Schedule SE instructions and on the IRS website.