When does a reseller owe self-employment tax, and how much is it?
Self-employment tax applies when your net earnings from self-employment are $400 or more, and Schedule SE counts those earnings as 92.35% of net profit, so a Schedule C profit under about $433 stays below the line. The rate is 15.3%: 12.4% for Social Security on net earnings up to $184,500 in 2026, less any wages already subject to it, plus 2.9% for Medicare on all of it, and half of the tax is deducted in figuring adjusted gross income.
General information from IRS sources, not tax advice. It doesn't say what you should file; check with a tax professional about your own situation.
Checked against the IRS pages listed below on .
What the IRS says
"Combine lines 4a and 4b. If less than $400, stop; you don't owe self-employment tax."
"The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance)."
"This tax applies no matter how old you are and even if you are already getting social security or Medicare benefits."
"If you had a loss in one business, it reduces the income from another."
The math, step by step
| Step | 2025 | 2026 |
|---|---|---|
| Net earnings from self-employment | Net profit times 92.35% | Net profit times 92.35% |
| Floor | Under $400: no self-employment tax | $400 or more of net earnings |
| Social Security part | 12.4% of net earnings, up to $176,100 minus Social Security wages | 12.4% of net earnings, up to $184,500 minus expected Social Security wages |
| Medicare part | 2.9% of all net earnings | 2.9% of all net earnings |
| Deduction | Half of the tax, on Schedule 1, line 15 | Half of the tax, subtracted in figuring expected AGI |
How it connects to Schedule C
The Schedule C instructions say net profit from line 31 goes on Schedule SE, line 2. The tax from Schedule SE goes on Schedule 2, and half of it is deducted on Schedule 1, line 15. The IRS says that deduction affects only income tax, not net earnings from self-employment or the self-employment tax itself. Estimated tax payments cover self-employment tax as well as income tax: see estimated tax.
The additional 0.9% Medicare tax
The IRS self-employment tax page says an additional 0.9% Medicare tax applies when wages, compensation or self-employment income, together with a spouse's on a joint return, exceed $250,000 for married filing jointly, $125,000 for married filing separately, or $200,000 for single, head of household or qualifying surviving spouse.
The optional method for low-profit years
The Schedule SE instructions say that even with a loss or a small amount of self-employment income, it may be to your benefit to file Schedule SE and use an optional method, for example for Social Security coverage. On the 2025 form, the nonfarm optional method requires net nonfarm profits under $7,840 and under 72.189% of gross nonfarm income, and net earnings of at least $400 in 2 of the prior 3 years; it can be used no more than five times.
Worked examples
$5,000 of net profit in 2026
Net earnings are $4,617.50 ($5,000 times 92.35%). Social Security: $572.57 (12.4%). Medicare: $133.91 (2.9%). Self-employment tax: $706.48, and half of it, $353.24, is deducted in figuring adjusted gross income.
Just under and just over
A $420 net profit gives $387.87 of net earnings, under $400, so no self-employment tax. A $460 net profit gives $424.81, so the tax applies: $52.68 plus $12.32, or $65.00.
A W-2 job and reselling in 2026
Wages subject to Social Security are $178,000 and net profit from reselling is $12,000, so net earnings are $11,082. Only $6,500 of the $184,500 base is left, so the Social Security part is $806.00; Medicare on all $11,082 is $321.38. Self-employment tax: $1,127.38, with $563.69 deducted.
Edge cases
- Age and benefits don't matter: the tax applies even if you already get Social Security or Medicare.
- Two businesses are combined on one Schedule SE, and a loss in one reduces the income from the other.
- When spouses make joint estimated tax payments and both have self-employment income, Form 1040-ES says to figure the self-employment tax for each of them separately.
- The IRS's self-employment tax page gives the 2024 base, $168,600, and refers to Schedule SE for other years. The 2026 figure, $184,500, is in Form 1040-ES (2026) and in Publication 334's What's New for 2026.
What to do
- Estimate net profit, not gross sales, each quarter; the Form 1040-ES worksheet figures self-employment tax from it.
- If you also have a W-2 job, check the Social Security wages on your pay stubs; they use up the $184,500 first.
- Ask a tax professional whether the optional method helps in a low-profit year.
Questions
Is self-employment tax figured on my gross sales?
No. It is figured on net earnings from self-employment, which Schedule SE counts as 92.35% of net profit, after cost of goods sold and expenses.
Is there a minimum?
Yes. If net earnings are under $400, Schedule SE says you don't owe self-employment tax. That is about $433 of net profit.
I also have a W-2 job. Do I pay Social Security twice?
Not past the cap. Social Security applies to combined wages and net earnings up to $184,500 in 2026. Medicare applies to all of it.
General information, not tax advice
This page summarizes IRS publications, instructions and guidance as read on . It doesn't say what you should file or deduct. Tax rules depend on your facts, and state rules aren't covered here (see state rules). Check with a tax professional.
Sources
Every figure, rule and quote on this page comes from one of these official pages.
- Schedule SE (Form 1040) 2025, Self-Employment Tax (IRS; read Oct 19, 2026)
- Instructions for Schedule SE (Form 1040) (2025) (IRS, page reviewed or updated Apr 30, 2026; read Oct 19, 2026)
- Self-employment tax (Social Security and Medicare taxes) (IRS, page reviewed or updated Jun 27, 2026; read Oct 19, 2026)
- Form 1040-ES (2026), Estimated Tax for Individuals (IRS, dated Feb 12, 2026; read Oct 19, 2026)
- Publication 334 (2025), Tax Guide for Small Business (IRS, page reviewed or updated Apr 30, 2026; read Oct 19, 2026)
- Instructions for Schedule C (Form 1040) (2025) (IRS, page reviewed or updated Apr 30, 2026; read Oct 19, 2026)
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