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Publication 225

Chapter 12
Self-Employment Tax(p71)

What's New for 2016(p71)

Maximum net earnings.(p71)
The maximum net self-employment earnings subject to the social security part (12.4%) of the self-employment tax is $118,500 for 2016, unchanged from 2015. There is no maximum limit on earnings subject to the Medicare part (2.9%) or, if applicable, the Additional Medicare Tax (0.9%).

What's New for 2017(p71)

Maximum net earnings.(p71)
The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2017 will be discussed in the 2016 Pub. 334.


Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners.
You usually have to pay SE tax if you are self-employed. You are usually self-employed if you operate your own farm on land you either own or rent. You have to figure SE tax on Schedule SE (Form 1040).
Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. See chapter 13 for information on employment taxes.
If your self-employment income exceeds $125,000, you may also be subject to a 0.9% Additional Medicare Tax on the income in excess of a threshold amount. You figure this tax using Form 8959. For more information about the Additional Medicare Tax, including the threshold amounts, see the Instructions for Form 8959.

Self-employment tax rate.(p71)

The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).


Useful items

You may want to see:

 541 Partnerships
Form (and Instructions)
 1040: U.S. Individual Income Tax Return
 Sch F (Form 1040): Profit or Loss From Farming
 Sch SE (Form 1040): Self-Employment Tax
 1065: U.S. Return of Partnership Income
 Sch K-1 (Form 1065): Partner's Share of Income, Deductions, Credits, etc.
 Form 8959: Additional Medicare Tax
See chapter 16 for information about getting publications and forms.

Why Pay Self-Employment Tax?(p71)

Social security benefits are available to self-employed persons just as they are to wage earners. Your payments of SE tax contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.

How to become insured under social security.(p71)

You must be insured under the social security system before you begin receiving social security benefits. You are insured if you have the required number of credits (also called quarters of coverage).

Earning credits in 2016.(p71)

You can earn a maximum of four credits per year. For 2016, you earn one credit for each $1,260 of combined wages and self-employment earnings subject to social security tax. You need $5,040 ($1,260 × 4) of combined wages and self-employment earnings subject to social security tax to earn four credits in 2016. It doesn’t matter whether the income is earned in 1 quarter or is spread over 2 or more quarters.
For an explanation of the number of credits you must have to be insured and the benefits available to you and your family under the social security program, consult your nearest Social Security Administration (SSA) office or visit the SSA website at
Making false statements to get or to increase social security benefits may subject you to penalties.

The Social Security Administration (SSA) time limit for posting self-employment earnings.(p72)

Generally, the SSA will give you credit only for self-employment earnings reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income.
If you file your tax return or report a change in your self-employment earnings after the SSA time limit for posting self-employment earnings, the SSA may change its records, but only to remove or reduce the amount. The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above.