What is the self-employment tax rate in 2026?

Self-employment tax is 15.3% on net self-employment income up to $176,100 (the 2026 Social Security wage base), and 2.9% on income above that threshold. This covers both the employee and employer portions of Social Security and Medicare taxes.

How can I legally reduce my self-employment tax?

The four main legal strategies are: (1) S-Corp election to split income between salary and distributions, (2) maximizing deductible business expenses to reduce net SE income, (3) contributing to a Solo 401(k) or SEP-IRA to reduce taxable income, and (4) deducting the employer-equivalent portion of SE tax on Schedule 1.

Does an S-Corp election eliminate self-employment tax?

No — it reduces it. With an S-Corp, you pay SE taxes only on your salary (which must be 'reasonable'). Distributions above your salary are not subject to SE tax. The savings depend on how much of your profit you can legitimately classify as a distribution rather than salary.

What is a Solo 401(k) and how does it reduce taxes?

A Solo 401(k) is a retirement plan for self-employed individuals with no employees. In 2026, you can contribute up to $23,500 as an employee plus 25% of net self-employment income as an employer contribution, up to a combined limit of $70,000. Contributions reduce your taxable income dollar-for-dollar.

Self-Employment Tax Reduction: 4 Legal Strategies

# Self-Employment Tax Reduction: The Four Legal Strategies Ranked by Income Level Self-employment tax is 15.3% on the first $168,600 of net SE income. You can legally reduce it through four mechanisms: the SE tax deduction, S-Corp election with a reasonable salary, retirement account contributions, and the QBI deduction. Each has a different income threshold where it starts making mathematical sense. Self-employment tax is 15.3% — but four legal mechanisms reduce it significantly. The SE tax deduction, S-Corp election math, Solo 401(k) limits, and QBI deduction ranked by the income level where each one actually pays off. Read the full article at https://solofilinglab.com/articles/self-employment-tax-reduction-strategies-income-level