Tax glossary

Schedule SE

Schedule SE — what it means, how it works, and a real example, explained without the jargon.

What is Schedule SE?

Schedule SE calculates the self-employment tax — the Social Security and Medicare you owe on business profit, since no employer is splitting it with you.

How it works

You take your net profit from Schedule C, multiply by 92.35%, and apply 15.3% (12.4% Social Security up to the wage base, plus 2.9% Medicare). Then you get to deduct half of that tax on your 1040, which softens the blow.

A quick example

On $42,000 of net profit, SE tax runs about $5,900. You'll also deduct roughly $2,950 (half) as an adjustment to income, lowering your income tax.

What people get wrong

This is the tax that shocks first-year freelancers. It's on top of income tax and starts at just $400 of net earnings — budget for the full 15.3%, not just your income-tax bracket.

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Frequently asked questions

What does Schedule SE mean?

Schedule SE calculates the self-employment tax — the Social Security and Medicare you owe on business profit, since no employer is splitting it with you.

How does Schedule SE work?

You take your net profit from Schedule C, multiply by 92.35%, and apply 15.3% (12.4% Social Security up to the wage base, plus 2.9% Medicare). Then you get to deduct half of that tax on your 1040, which softens the blow.

What's the most common mistake with schedule se?

This is the tax that shocks first-year freelancers. It's on top of income tax and starts at just $400 of net earnings — budget for the full 15.3%, not just your income-tax bracket.