If you make $400 or more working for yourself, you’re subject to the self-employment tax. You work for yourself if you’re a sole-proprietor, owner in a partnership, or independent contractor.
What is the self-employment tax?
The self-employment tax is social security and Medicare taxes for people who work primarily for themselves. As an employee, your employer is responsible for a portion of social security and Medicare taxes. When you work for yourself, however, you’re responsible for both the employee and employer portions of those taxes.
You’ll pay 15.3% in self-employment taxes – 2.9% for Medicare and 12.4% in social security. You’ll only pay social security tax on the first $127,200 you make.