Self-Employment Tax in Indiana (2026)

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

Self-employment tax is a federal tax of 15.3% on your net self-employment earnings - 12.4% for Social Security (up to the annual wage base) plus 2.9% for Medicare - figured on Schedule SE. You deduct half of it, pay it quarterly with Form 1040-ES, and separately owe Indiana's flat state income tax plus a county income tax.

How Self-Employment Tax Works for Indiana Filers

Self-employment tax is the way sole proprietors, independent contractors, single-member LLC owners, partners, and gig workers pay into Social Security and Medicare. When you work for an employer, the company withholds these payroll taxes and pays half itself. When you work for yourself, no employer covers that share - so you pay both the employee and employer portions through self-employment tax. This is a federal tax collected by the IRS; Indiana does not levy a separate self-employment tax of its own.

The tax applies to your net earnings from self-employment - your business profit after deductible expenses, not your gross receipts. If your net earnings are less than $400 for the year, you generally owe no self-employment tax. Because Indiana residents still report that same business profit on a state return, most self-employed Hoosiers manage two parallel obligations: the federal 15.3% self-employment tax and Indiana's income taxes. Getting an EIN and keeping clean books makes both far easier. For the national picture, see our business tax guide.

The 15.3% Rate: Social Security and Medicare

The 15.3% self-employment tax breaks into two parts. The first is the 12.4% Social Security (Old-Age, Survivors, and Disability Insurance) portion. This applies only up to an annual ceiling called the Social Security wage base, which the Social Security Administration adjusts every year ($176,100 for 2025). Once your combined wages and net self-employment earnings reach that ceiling, no more Social Security tax is due for the year.

The second part is the 2.9% Medicare (Hospital Insurance) portion, and it has no cap - it applies to all of your net self-employment earnings, however high. Before applying either rate, Schedule SE first multiplies your net profit by 92.35%. That adjustment approximates the employer-side deduction a business would take, so you are not taxed on the "employer half" you effectively pay yourself. The federal rate structure is set by the Internal Revenue Code, and the two components are why the combined figure is 15.3% rather than a single flat number.

Calculating Tax on Schedule SE

You report and compute self-employment tax on Schedule SE (Form 1040). The sequence is straightforward once your books are in order. First, you determine net profit on Schedule C (or Schedule F for farming, or a Schedule K-1 for partnership earnings). Next, Schedule SE multiplies that net profit by 92.35% to reach the amount subject to tax. Then it applies the 12.4% Social Security rate up to the wage base and the 2.9% Medicare rate to the full amount.

The resulting self-employment tax carries to Schedule 2 of your Form 1040 and is added to your income tax. Because it is not withheld from a paycheck, many new business owners are surprised by its size - a self-employed person netting $60,000 owes roughly $8,000 in self-employment tax before income tax even enters the picture. That is why setting money aside as you earn, or choosing an S-corporation structure once profits are high enough to justify payroll, are common planning moves. You can estimate your liability with our self-employment tax calculator before you file.

The Half-SE-Tax Deduction and Additional Medicare Tax

Self-employed taxpayers get an important offset: you may deduct one-half of your self-employment tax as an adjustment to income on Schedule 1. This "above-the-line" deduction lowers your federal adjusted gross income - and therefore your income tax - even if you do not itemize. It does not reduce the self-employment tax itself; it simply mirrors the way an employer's share of payroll tax is deductible to a business.

Higher earners face an extra layer. The 0.9% Additional Medicare Tax applies to self-employment earnings above threshold amounts: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately. The 0.9% applies only to the portion above your threshold, and unlike the base Medicare tax, no employer match or half-deduction applies to it. It is figured on Form 8959 and combined with your other taxes on Form 1040. Note that Indiana's income tax starts from your federal figures, so these federal calculations feed the state return.

How to Calculate and Pay Self-Employment Tax

Here is the practical sequence Indiana self-employed filers follow each year and each quarter:

1. Total your net earnings. Track income and deductible expenses and reach net profit on Schedule C. Self-employment tax applies to profit, not gross revenue.
2. Compute the 15.3% on Schedule SE. Multiply net earnings by 92.35%, apply 12.4% Social Security up to the wage base and 2.9% Medicare on the rest.
3. Take the half-SE-tax deduction. Deduct one-half of the tax on Schedule 1 to reduce your federal taxable income.
4. Pay federal estimated tax quarterly. Use Form 1040-ES to remit income tax and self-employment tax in four installments so you avoid an underpayment penalty.
5. Handle Indiana tax. Make Indiana estimated payments through INTIME and file your state return, which applies the flat state rate plus your county's local income tax.

Keeping a dedicated tax-savings account and reconciling it against Schedule SE each quarter is the simplest way to stay current on both the federal and Indiana obligations.

Indiana State and County Income Tax

Federal self-employment tax is only half of the story for a Hoosier. Indiana imposes a flat state adjusted gross income tax on individuals, and the rate has been falling under a series of scheduled legislative reductions (3.0% for 2025, stepping down in later years). Your self-employment profit is part of Indiana adjusted gross income, so it is taxed at that flat state rate on your Indiana individual return.

On top of the state tax, Indiana is one of the states with a county income tax - officially the Local Income Tax (LIT). The rate depends on the county where you live (and in some cases work), and it is administered by the Indiana Department of Revenue rather than by each county. So a self-employed Indiana resident effectively layers three taxes on the same profit: federal self-employment tax, the flat state income tax, and the county local income tax. All state and county payments run through the Department of Revenue's INTIME portal, and county rates are published by the Department each year. If you run an Indiana LLC, the same profit is generally taxed to you as the owner - see Indiana LLC tax filing for entity-level detail.

Quarterly Estimated Payments

Because no employer withholds tax from self-employment income, the IRS and Indiana both expect you to pay as you go. Federally, you generally must make quarterly estimated payments with Form 1040-ES if you expect to owe at least $1,000 in tax after withholding and credits. The four installments are typically due April 15, June 15, September 15, and January 15 of the following year. Falling short can trigger an underpayment penalty even if you pay the full balance by the April deadline.

Indiana runs a parallel estimated-tax system. If you expect to owe state and county tax beyond what is withheld, you make Indiana estimated payments on roughly the same quarterly calendar through INTIME. A reliable shortcut used by many self-employed taxpayers is the "safe harbor": paying either 90% of the current year's tax or 100% (110% for higher incomes) of last year's tax generally avoids federal penalties. Track both the federal and Indiana deadlines on one calendar so a state payment does not slip. New to entity setup? Compare an LLC to going solo in our S-corp vs LLC comparison and review the glossary for tax terms.

Frequently Asked Questions

What is the self-employment tax rate in Indiana?

The self-employment tax is a federal tax of 15.3% on net self-employment earnings: 12.4% for Social Security up to the annual wage base and 2.9% for Medicare on all earnings. Indiana does not add its own self-employment tax, but you still owe Indiana income tax.

Do I pay Indiana state tax on self-employment income?

Yes. Self-employment profit flows to your Indiana return and is taxed at the state's flat adjusted gross income tax rate, plus a county local income tax based on where you live. This is separate from the federal self-employment tax.

What form do I use to figure self-employment tax?

You use Schedule SE (Form 1040) to calculate self-employment tax. It multiplies your net earnings by 92.35% and applies the 12.4% Social Security and 2.9% Medicare rates. The result carries to Schedule 2 of your Form 1040.

Can I deduct half of my self-employment tax?

Yes. You deduct one-half of your self-employment tax as an adjustment to income on Schedule 1. This deduction reduces your federal adjusted gross income but does not reduce the self-employment tax itself.

When are quarterly self-employment taxes due?

Federal estimated payments on Form 1040-ES are generally due April 15, June 15, September 15, and January 15 of the following year. Indiana estimated payments follow a similar quarterly schedule and are paid through INTIME.

Does the 0.9% Additional Medicare Tax apply to me?

It applies to self-employment earnings above the thresholds: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately. The extra 0.9% applies only to the amount over your threshold.

Related

• Business tax overview (cluster hub)
• Self-employment tax calculator
• Indiana LLC tax filing requirements
• S-corp vs LLC
• How to get an EIN
• What is an ITIN
• How to form an LLC in Indiana (sibling)

More: registered agents, trademarks, business licenses, DBAs, operating agreements, and dissolving an LLC.

Sources

1. IRS - Self-Employment Tax (Social Security and Medicare Taxes) (15.3% = 12.4% + 2.9%; $400 threshold).
2. IRS - About Schedule SE (Form 1040) (92.35% factor; computing the tax).
3. IRS - Schedule SE (Form 1040) PDF.
4. IRS - About Form 1040-ES, Estimated Tax for Individuals (quarterly payments).
5. IRS - Questions and Answers for the Additional Medicare Tax (0.9%; $200k/$250k/$125k thresholds).
6. IRS - Self-Employed Individuals Tax Center (half-SE-tax deduction; estimated tax).
7. Social Security Administration - Contribution and Benefit Base (annual Social Security wage base).
8. Cornell Law LII - 26 U.S.C. § 1401, Rate of tax.
9. Cornell Law LII - 26 U.S.C. § 1402, Definitions (net earnings from self-employment).
10. Indiana Department of Revenue - Individual Income Taxes (flat state adjusted gross income tax).
11. Indiana Department of Revenue - INTIME Tax Center (state and county payments).
12. Indiana Department of Revenue - Estimated Tax (Indiana quarterly payments).
13. Indiana Department of Revenue - County Tax Information (local income tax rates by county).
14. Indiana General Assembly - Indiana Code, Title 6 (Taxation), Article 3, Adjusted Gross Income Tax.
15. Indiana General Assembly - Indiana Code, Title 6, Article 3.6, Local Income Taxes.

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. Tax rates, thresholds, and county rates change; verify current figures with the IRS and the Indiana Department of Revenue before acting.