Self-Employment Tax vs. Income Tax: What's the Difference?

The two taxes side by side

Self-employment tax: your replacement for FICA

As an employee, you pay 7.65% FICA and your employer quietly pays a matching 7.65%. When you're self-employed, you are both — so you pay the full 15.3% yourself. It breaks down as 12.4% for Social Security (only on the first $184,500 of net earnings in 2026) and 2.9% for Medicare (on all of it, with an extra 0.9% above $200,000).

Two breaks soften it: SE tax is calculated on only 92.35% of your net profit, and half of the SE tax is deductible against your income tax. So the headline 15.3% is really closer to ~14.1% of profit, and part of that comes back via a lower income-tax bill.

Income tax: charged on your profit, at your bracket

On top of SE tax, your business profit is ordinary income subject to the same federal brackets as a salary. But it's taxed on a smaller number: you subtract the standard deduction, the deductible half of your SE tax, and — for most freelancers — the 20% QBI deduction before applying the brackets. That's why two people with the same gross 1099 income can owe very different income tax.

Putting it together

A freelancer with $80,000 of profit owes roughly $11,300 in self-employment tax *and* federal income tax on top — but the income-tax side is reduced by the standard deduction, half the SE tax, and QBI. Add them and a typical single filer keeps in the low-to-mid 70s percent of profit before state tax.