For someone working for themselves, “self-employment tax” does not mean every federal tax they might owe. The IRS uses the term primarily for Social Security and Medicare taxes, and says self-employed people generally may owe those taxes as well as federal income tax. A freelancer’s business profit is relevant to working out both, but the taxes serve different purposes and are reported through distinct parts of the federal return. Internal Revenue Service
Two taxes with different jobs
Self-employment tax is the Social Security and Medicare tax associated with work for oneself. The IRS describes it as similar to the Social Security and Medicare taxes withheld from most wage earners’ pay. The phrase itself does not include income tax. That boundary is useful because casual conversation sometimes uses “self-employment tax” to mean the whole tax bill. Internal Revenue Service
Federal income tax is separate. The IRS says self-employed individuals generally must pay self-employment tax as well as income tax, subject to the rules that apply to their circumstances. Income tax rates apply in layers called brackets: a higher bracket rate applies to the portion of taxable income in that layer, not to all income simply because it crossed into the layer. The IRS page linked here presents 2025 rates, so those figures should not be treated as 2026 rates. Internal Revenue Service
Start with business profit
The IRS describes net profit or loss as business income minus business expenses. When expenses are lower than income, the difference is net profit; when expenses are higher, it is a net loss, though some losses can be limited in particular situations. The profit calculation is a starting point for understanding the taxes, not a claim that the same final taxable amount or calculation automatically applies to both. Internal Revenue Service
Consider a clearly hypothetical freelancer with $60,000 in business income and $15,000 in business expenses. The arithmetic leaves $45,000 in net business profit. That example does not establish the person’s final tax bill. It simply illustrates why gross receipts and profit are different, and why a discussion of either tax starts with the business result rather than the amount clients paid before expenses.
Social Security and Medicare focus
The IRS says Schedule SE is used to report Social Security and Medicare taxes, using income or loss calculated on Schedule C for a sole proprietor. Schedule C reports business income or loss from a sole proprietorship or profession. These forms distinguish the business accounting step from the calculation and reporting of self-employment tax. Internal Revenue Service
Income tax uses the annual federal income tax return and its applicable rules. The IRS says that, in general, a self-employed person files an annual income tax return and pays estimated taxes quarterly. Estimated tax is a method for paying Social Security, Medicare and income taxes when an employer is not withholding them. That payment mechanism does not make the three tax components the same tax. Internal Revenue Service
Why the label matters
A wage earner often sees Social Security and Medicare withholding on a pay statement, while someone in business for themselves generally does not have an employer withholding those amounts from client payments. The IRS comparison helps explain why the self-employment tax exists: it covers those programs for people working for themselves. Federal income tax remains a different obligation, based on the applicable income-tax rules. Internal Revenue Service
The practical distinction is conceptual, not a personal calculation: self-employment tax refers to Social Security and Medicare taxes, while income tax is separate. A hypothetical $45,000 business profit is not a take-home figure, a guaranteed taxable-income amount or an estimate of taxes due. Business structure, expenses and other circumstances matter to the final reporting. The IRS also notes that a business’s form affects which return forms apply, another reason the label alone cannot describe a person’s entire tax situation. Internal Revenue Service
Sources & further reading
- Self-employed individuals tax center ↗Internal Revenue Service
- Federal income tax rates and brackets ↗Internal Revenue Service
