Yes. You pay in the form of Self-Employment Contributions Act (SECA) taxes, reported on your federal tax return. The rate is 15.3 percent of net proceeds from your business. You file a Schedule C (Form 1040) to report profit or loss from self-employment and Schedule SE (Form 1040) to calculate your Social Security and Medicare taxes.
The Social Security tax rate for 2021 is 12.4 percent on self-employment income up to $142,800. You do not pay Social Security taxes on earnings above that amount. There is no such cap for Medicare contributions; you pay the Medicare tax rate of 2.9 percent on all profits from self-employment. A portion of your SECA tax can be taken as a deduction elsewhere on your tax return.
Keep in mind
If you hold a wage-paying job, you pay 7.65 percent of your gross income into Social Security and Medicare, via FICA payroll-tax withholding. Your employer makes a matching contribution.
Updated December 28, 2020
Find the answers to the most common Social Security questions such as when to claim, how to maximize your retirement benefits and more.