Taxes & Entities

Self-employment Tax

Self-employment tax is the full ~15.3% FICA that the self-employed pay themselves — both the "employee" and "employer" halves that a regular worker splits invisibly with their employer — and the shock it delivers to the newly self-employed reveals a universal truth: the headline price of a job (or anything) hides real costs that someone else was quietly absorbing.

  • Beginner
  • 10 min total
  • 12 chapters

What decision this helps you make: How to understand and plan for self-employment tax — and, more broadly, how to find the invisible, someone-else-was-paying-it costs that make up the true price of things.

What this topic is

The Social Security and Medicare tax the self-employed pay on their own earnings — both halves of FICA (~15.3%), versus the ~7.65% an employee sees, because they're both worker and employer.

Why it matters

It's the painful surprise of self-employment, and it reveals a universal principle: headline prices hide real costs that someone else was absorbing — the true cost was always higher.

Who should learn it

Anyone self-employed or considering it, freelancers and business owners, and anyone learning to see the invisible costs behind sticker prices.

What you will understand

  • The self-employed pay both halves of FICA (~15.3%)
  • Employees see only ~7.65%; the employer pays the rest invisibly
  • So the same headline income can mean a much bigger tax bill
  • The lesson: headline prices hide costs someone else absorbed

Prerequisites

Common misconception

"If I earn the same as a freelancer as I did at my job, my taxes will be about the same." Usually not — as a freelancer you owe both halves of FICA (self-employment tax) that your employer used to pay invisibly, plus you must handle your own withholding. The same headline income can produce a substantially bigger tax bill, because a hidden cost just became yours.