Self-employment tax is the Social Security and Medicare tax a sole proprietor pays on net earnings from self-employment, at a combined 15.3% rate — 12.4% Social Security plus 2.9% Medicare — on top of income tax.
It kicks in at $400 — the IRS says you “usually must pay self-employment tax if you had net earnings from self-employment of $400 or more,” which a decent night’s purse clears. Only the Social Security half is capped, and the cap counts your day job first: the IRS page states “for 2024, the first $168,600 of your combined wages, tips, and net earnings” is subject to it. That page still carried a 2024 figure at its June 27, 2026 review — the base changes annually, so look up the current one. The Medicare part carries no such cap, and a 0.9% Additional Medicare Tax applies above a filing-status threshold. You deduct one-half of the SE tax in figuring AGI. General education, not tax advice.
A racer's first profitable Schedule C owes 15.3% before income tax touches it, which is the difference between a good season on paper and a surprise bill in April.