Self-Employment Tax in California (2026)

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 6, 2026 · Last updated Aug 6, 2026

Self-employment tax in California involves federal Social Security and Medicare taxes, which total 15.3% on net earnings up to the annual limit ($168,600 for 2024), plus California state income tax. California does not impose a separate state self-employment tax. Self-employed individuals typically pay these taxes through quarterly estimated tax payments to both the IRS and the California Franchise Tax Board (FTB).

Understanding Self-Employment Tax in California

Self-employment tax for individuals operating businesses in California is primarily composed of two parts: federal self-employment tax and California state income tax. Unlike some states, California does not levy a separate state-level self-employment tax. The federal self-employment tax covers Social Security and Medicare contributions for self-employed individuals, similar to the FICA taxes withheld from employee wages. California income tax is then applied to the net earnings from self-employment, along with any other taxable income.

Individuals who are self-employed, such as independent contractors, freelancers, or sole proprietors, are responsible for paying these taxes. This also applies to general partners in a partnership and, in some cases, members of a limited liability company (LLC) that is taxed as a sole proprietorship or partnership. The Internal Revenue Service (IRS) and the California Franchise Tax Board (FTB) are the primary agencies involved in collecting these taxes.

Because taxes are not withheld from self-employment income, individuals typically need to make estimated tax payments throughout the year to avoid penalties. This guide will detail the calculation, payment, and reporting requirements for both federal and California self-employment-related taxes.

Federal Self-Employment Tax

The federal self-employment tax is a combination of Social Security and Medicare taxes. For 2024, the total rate is 15.3%. This rate is broken down as follows:

• Social Security: 12.4% on net earnings up to the annual wage base limit. For 2024, this limit is $168,600.
• Medicare: 2.9% on all net earnings from self-employment, with no wage base limit.

The self-employment tax is calculated on 92.35% of your net earnings from self-employment. This adjustment accounts for the fact that employees can deduct their share of FICA taxes from their gross income, while self-employed individuals can deduct one-half of their self-employment tax from their gross income when calculating adjusted gross income (AGI).

For example, if your net earnings from self-employment are $50,000, the calculation would be:

• $50,000 (Net Earnings) x 0.9235 = $46,175 (Amount subject to SE tax)
• $46,175 x 0.153 (SE Tax Rate) = $7,065.78 (Total Federal SE Tax)

You would then deduct half of this amount ($3,532.89) when calculating your AGI on your federal income tax return, Form 1040. The federal self-employment tax is reported on Schedule SE (Form 1040), Self-Employment Tax.

For more detailed information on federal self-employment tax, refer to the IRS's official guidance.

California State Income Tax on Self-Employment Income

California imposes a progressive state income tax on all taxable income, including net earnings from self-employment. California does not have a separate self-employment tax. The state income tax rates vary based on income level and filing status. For 2024, California's marginal income tax rates range from 1% to 12.3% for most taxpayers, with an additional 1% surcharge on taxable income over $1,000,000 (the "Mental Health Services Tax").

Your net earnings from self-employment, after deducting one-half of your federal self-employment tax, contribute to your total adjusted gross income (AGI) for California tax purposes. This AGI is then used to determine your taxable income, against which the state's tax rates are applied. California also offers various credits and deductions that can reduce your overall state tax liability.

For specific tax rates and brackets, consult the California Form 540 instructions or the Franchise Tax Board (FTB) website. Keep in mind that California's tax laws and rates are subject to change annually.

Estimated Tax Payments: Federal and California

Since self-employment income is not subject to withholding, both the IRS and the California FTB require self-employed individuals to pay estimated taxes throughout the year if they expect to owe a certain amount of tax. This ensures that taxpayers are paying their tax liability as income is earned, rather than in one lump sum at the end of the year.

Federal Estimated Taxes

You generally must pay federal estimated tax if you expect to owe at least $1,000 in tax for the year. Payments are typically made in four equal installments by the following due dates:

• April 15 (for income earned January 1 to March 31)
• June 15 (for income earned April 1 to May 31)
• September 15 (for income earned June 1 to August 31)
• January 15 of next year (for income earned September 1 to December 31)

If a due date falls on a weekend or holiday, the deadline shifts to the next business day. You calculate your federal estimated tax using Form 1040-ES, Estimated Tax for Individuals. Payments can be made online, by mail, or through the IRS Direct Pay system. Failure to pay enough estimated tax can result in penalties. More information is available on the IRS Estimated Taxes page.

California Estimated Taxes

You generally must pay California estimated tax if you expect to owe at least $500 in state income tax for the year (or $250 if married filing separately). The payment due dates for California estimated taxes are generally the same as federal estimated taxes:

• April 15
• June 15
• September 15
• January 15 of next year

California estimated taxes are calculated using Form 540-ES, Estimated Tax for Individuals. Payments can be made online through the FTB's website, by mail, or by phone. The FTB provides detailed instructions and payment options on its Estimated Tax Payments page. Penalties may apply for underpayment of estimated taxes.

Self-Employment Tax for LLCs in California

The way an LLC is taxed in California depends on its federal tax classification. For federal tax purposes, an LLC can be classified as a disregarded entity (sole proprietorship), a partnership, an S corporation, or a C corporation. This federal classification then dictates how self-employment tax applies.

• Single-Member LLC (Disregarded Entity): If a single-member LLC is treated as a disregarded entity by the IRS, its owner reports all business income and expenses on Schedule C (Form 1040). The net profit from Schedule C is then subject to federal self-employment tax on Schedule SE. California income tax applies to the net profit.
• Multi-Member LLC (Partnership): If a multi-member LLC is treated as a partnership, each member's share of the LLC's net earnings from self-employment is reported on Schedule K-1 (Form 1065). Each partner then uses their Schedule K-1 information to calculate and report their federal self-employment tax on Schedule SE. California income tax applies to each partner's distributive share of income.
• LLC Electing S Corporation Status: If an LLC elects to be taxed as an S corporation, its owners (shareholders) are typically treated as employees for tax purposes. They must pay themselves a "reasonable salary," which is subject to payroll taxes (Social Security and Medicare) withheld by the LLC. Any remaining profits distributed to the owners are generally not subject to self-employment tax. This can be a strategy to reduce self-employment tax, but it comes with additional payroll tax obligations and administrative burden. California also recognizes S corporation elections and has its own Form 3885L, Depreciation and Amortization for S corporations.

In addition to income tax, California LLCs must pay an annual LLC tax of $800, regardless of income, and an annual LLC fee if their total California income is $250,000 or more. These are reported on Form 3522, LLC Tax Voucher and Form 568, Limited Liability Company Return of Income, respectively. These are separate from self-employment tax.

Deductions and Credits for Self-Employed Individuals

Self-employed individuals in California can take advantage of various deductions and credits to reduce their federal and state tax liabilities. Key deductions related to self-employment include:

• One-Half of Self-Employment Tax: As mentioned, you can deduct one-half of your federal self-employment tax when calculating your federal AGI. This also reduces your California taxable income.
• Business Expenses: Ordinary and necessary business expenses are deductible from your gross business income, reducing your net earnings from self-employment. This includes expenses like home office deductions, business mileage, supplies, advertising, and professional fees. Keep accurate records of all business expenses.
• Health Insurance Premiums: If you are self-employed and not eligible to participate in an employer-sponsored health plan, you may be able to deduct the cost of health insurance premiums for yourself, your spouse, and your dependents.
• Contributions to Retirement Plans: Contributions to self-funded retirement plans, such as a SEP IRA, SIMPLE IRA, or Solo 401(k), are tax-deductible and can significantly reduce your taxable income.

California also offers various state-specific credits and deductions. It is advisable to consult a qualified tax professional or refer to FTB forms and publications for the most current information on available deductions and credits.

Recordkeeping Requirements

Accurate and thorough recordkeeping is crucial for self-employed individuals to correctly calculate their self-employment tax and state income tax, and to support any deductions claimed. Both the IRS and the FTB require taxpayers to maintain records for a specified period, typically three years from the date the return was filed or the tax was paid, whichever is later.

Essential records to keep include:

• All income received (e.g., invoices, bank statements, payment receipts).
• All business expenses (e.g., receipts, invoices, mileage logs, credit card statements).
• Bank statements for business accounts.
• Copies of all filed federal and state tax returns.
• Records of estimated tax payments.

Good recordkeeping not only helps with tax preparation but also serves as documentation in case of an audit by the IRS or FTB. Digital recordkeeping systems can simplify this process.

Other California Taxes for Self-Employed

Beyond federal self-employment tax and state income tax, self-employed individuals and businesses in California may be subject to other state taxes:

• Sales and Use Tax: If your business sells tangible personal property in California, you must register with the California Department of Tax and Fee Administration (CDTFA) and collect and remit sales tax. This applies to both online and brick-and-mortar sales. See California sales tax for more.
• Payroll Taxes (if you have employees): If you hire employees, you will be responsible for California payroll taxes, including State Unemployment Insurance (SUI), Employment Training Tax (ETT), State Disability Insurance (SDI), and Personal Income Tax (PIT) withholding. These are administered by the California Employment Development Department (EDD). See the EDD's forms and publications for details.
• Local Business Taxes and Licenses: Many cities and counties in California impose their own business taxes or require specific licenses and permits. These vary significantly by location and industry. Check with your local city and county government for applicable requirements. See business licenses for more.

Understanding all applicable tax obligations is vital for compliance and financial planning for any self-employed individual or small business in California.

Frequently Asked Questions

What is self-employment tax in California?

Self-employment tax in California refers to the federal Social Security and Medicare taxes (15.3% on net earnings up to the annual limit) that self-employed individuals pay, plus California state income tax. California does not have a separate state self-employment tax.

How is self-employment tax calculated?

Federal self-employment tax is calculated on 92.35% of your net earnings from self-employment. The Social Security portion is 12.4% on earnings up to the annual limit ($168,600 for 2024), and the Medicare portion is 2.9% on all net earnings. California income tax is then applied to your taxable income, which includes your net self-employment earnings.

Do I pay estimated taxes in California?

Yes, if you expect to owe at least $500 in California income tax (or $250 if married filing separately) for the year from self-employment or other income not subject to withholding, you generally must pay estimated taxes. These are typically paid in four installments throughout the year.

What forms do I use for self-employment tax?

For federal self-employment tax, you use IRS Schedule SE (Form 1040), Self-Employment Tax. For federal estimated taxes, you use Form 1040-ES. For California estimated taxes, you use Form 540-ES, Estimated Tax for Individuals. Your annual California income tax return is Form 540.

Does California have a state self-employment tax?

No, California does not impose a separate state self-employment tax. Self-employed individuals in California are subject to federal self-employment tax (Social Security and Medicare) and California state income tax on their net self-employment earnings.

Related

• Self-Employment Tax Calculator
• Estimated Tax Payments
• Schedule C (Form 1040)
• How to Form an LLC in California
• California Sales Tax
• Business Tax Hub
• Tax Glossary

Sources

1. IRS - Self-Employment Tax (Social Security and Medicare Taxes).
2. IRS - About Form 1040-ES, Estimated Tax for Individuals.
3. IRS - About Schedule SE (Form 1040), Self-Employment Tax.
4. IRS - Estimated Taxes.
5. IRS - IRS Announces 2024 Tax Brackets, Standard Deduction Amounts, and More (Social Security wage base limit).
6. California Franchise Tax Board (FTB) - Estimated Tax Payments.
7. California Franchise Tax Board (FTB) - Form 540-ES, Estimated Tax for Individuals.
8. California Franchise Tax Board (FTB) - Form 540, California Resident Income Tax Return.
9. California Franchise Tax Board (FTB) - Form 568, Limited Liability Company Return of Income.
10. California Franchise Tax Board (FTB) - Form 3522, LLC Tax Voucher.
11. California Franchise Tax Board (FTB) - Form 3885L, Depreciation and Amortization (S Corporations).
12. California Employment Development Department (EDD) - Payroll Tax Forms and Publications.
13. California Employment Development Department (EDD) - Tax Rates and Ceilings.
14. Cornell Law School Legal Information Institute (LII) - 26 U.S. Code § 1402 - Definitions relating to self-employment income.

LegalGlass provides general information for educational purposes and is not a law firm or a substitute for advice from a licensed attorney or tax professional. Laws, fees, and thresholds change; verify current requirements with the IRS and the California Franchise Tax Board before acting.