Self-Employment Tax in Washington (2026)

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 20, 2026 · Last updated Aug 20, 2026

Self-employment tax in Washington is a federal tax of 15.3% on net earnings - 12.4% for Social Security up to the annual wage base plus 2.9% for Medicare with no cap. Washington adds no state income tax, but it does impose business and occupation (B&O) tax on gross receipts.

Quick Answer

Rate: 15.3% (12.4% Social Security + 2.9% Medicare)
Who owes it: Sole proprietors, partners, and members of LLCs taxed as pass-throughs
Filing threshold: Net earnings from self-employment of $400 or more
Form: Schedule SE (Form 1040), with income on Schedule C
Deduction: One half of SE tax is deductible in figuring adjusted gross income
Additional Medicare Tax: 0.9% above filing-status thresholds of $125,000-$250,000
Washington income tax: None on individuals
Washington business tax: B&O tax on gross receipts, administered by the Department of Revenue

What Self-Employment Tax Is

Self-employment tax is the Social Security and Medicare tax paid by people who work for themselves. An employee splits those taxes with an employer; a self-employed person pays both halves. The rate under 26 U.S.C. 1401 is 15.3% - 12.4% for Social Security and 2.9% for Medicare.

It is entirely federal. Washington does not levy it, cannot waive it, and there is no Washington version of it. Living in a state with no income tax has no effect whatsoever on the 15.3%, which is the single most common misunderstanding among new Washington business owners.

Self-employment tax is also separate from federal income tax. You owe both on the same profit: income tax at your marginal bracket, plus SE tax on net earnings from self-employment.

Who Owes It in Washington

You owe self-employment tax if you are a sole proprietor, an independent contractor, a general partner, or a member of an LLC taxed as a partnership or disregarded entity. Under 26 CFR 301.7701-3, a single-member Washington LLC is disregarded by default and a multi-member LLC is a partnership - in both cases the profit reaches the owner as self-employment income.

Under 26 U.S.C. 1402 and the IRS's guidance, you must file Schedule SE once net earnings from self-employment reach $400. That threshold is low and it is not a tax-free allowance: crossing it makes the whole amount subject to the computation.

Forming an LLC does not by itself change this. An LLC provides liability protection, not a different tax rate. Only a corporate or S-corp election changes how much of the profit carries employment tax - see S-corp vs LLC.

How the Tax Is Computed

Start with net profit from Schedule C. Schedule SE then applies the tax to net earnings from self-employment. The 12.4% Social Security portion applies only up to the Social Security wage base the IRS publishes for the year, and W-2 wages you also earned count against that cap first. The 2.9% Medicare portion has no ceiling.

A 0.9% Additional Medicare Tax applies to wages and self-employment income above filing-status thresholds that range from $125,000 to $250,000. Unlike the base Medicare tax, this one is not matched or halved.

One half of the self-employment tax is deductible in figuring adjusted gross income - the IRS calls it the employer-equivalent portion. It reduces income tax, not the SE tax itself. Estimate your own figure with the self-employment tax calculator.

Quarterly Estimated Payments

No one withholds tax from a client payment, so the IRS expects quarterly estimated tax payments covering both income tax and self-employment tax. Waiting until April produces an underpayment penalty even if you pay the full balance then.

The practical method is to move a fixed percentage of every deposit into a separate tax account the day it lands. Owners frequently underestimate because they budget for income tax alone and forget the 15.3% sitting on top of it.

Washington's B&O Tax Is Not Income Tax

Washington has no personal income tax, so there is no state return reporting your pass-through profit. What Washington does have is the business and occupation tax, administered by the Department of Revenue, which is levied on gross receipts rather than on net income.

That distinction has teeth. B&O tax is owed on revenue whether or not the business is profitable, and the Department of Revenue maintains more than 50 classifications, each with its own rate, so the rate that applies depends on the activity you perform. Look up your classification on the Department of Revenue's B&O rate tables rather than assuming a single rate.

Washington also offers a small business B&O tax credit that reduces or eliminates the tax for very small filers, and most businesses need a state business license through the Department of Revenue's Business Licensing Service. See Washington business license and Washington LLC tax filing.

Legitimate Ways to Reduce the Bill

The first lever is deductions. Self-employment tax is computed on net earnings, so every legitimate business expense - home office, mileage, software, professional fees, health insurance where it qualifies - reduces both income tax and SE tax. Sloppy bookkeeping is expensive at a 15.3% marginal rate.

The second lever is retirement contributions, which reduce income tax though generally not SE tax. A SEP-IRA or solo 401(k) lets a profitable Washington sole owner shelter a substantial amount.

The third is an S-corp election on IRS Form 2553, which converts part of the profit into distributions not subject to employment tax. It requires payroll, reasonable compensation, and a separate Form 1120-S, so it pays off only above a meaningful profit level.

Contractors, Employees, and Paid Leave

If you hire, worker classification determines who pays these taxes. A true employee's Social Security and Medicare taxes are split with you and withheld; a genuine independent contractor pays their own self-employment tax. Misclassification is a frequent and costly audit issue at both the IRS and Washington agencies.

Washington also runs Paid Family and Medical Leave and long-term care programs that generally cover employees. Self-employed people are not automatically covered and may elect coverage; check the state program's rules before assuming you have benefits, because paying self-employment tax to the IRS gives you no Washington state leave benefits at all.

Common Mistakes

The biggest is assuming Washington's lack of an income tax means low overall tax. Federal self-employment tax and income tax still apply, and the state's B&O tax is charged on gross revenue regardless of profit - a combination that can surprise a business with high revenue and thin margins.

Others: skipping quarterly payments, believing an LLC alone reduces self-employment tax, ignoring the $400 filing threshold for a side business, and failing to register for a Washington business license. See how to form an LLC in Washington and Washington annual report for the surrounding obligations.

Frequently Asked Questions

What is the self-employment tax rate in Washington?

15.3% - the federal rate under 26 U.S.C. 1401, made up of 12.4% for Social Security up to the annual wage base plus 2.9% for Medicare with no cap. Washington does not add a state self-employment tax and cannot reduce the federal one. It is computed on Schedule SE from Schedule C net profit.

Does Washington have a state income tax on self-employment income?

No. Washington imposes no personal income tax, so there is no state return reporting pass-through profit. Washington instead taxes businesses through the business and occupation tax on gross receipts, administered by the Department of Revenue, which is owed whether or not the business is profitable.

When do I have to file Schedule SE?

When your net earnings from self-employment reach $400 or more for the year. That threshold applies to side businesses too. Crossing it makes the full amount subject to the computation - it is a filing trigger, not a tax-free allowance - and the tax is reported with your Form 1040.

What is Washington's B&O tax and how is it different?

The business and occupation tax is a state tax on gross receipts, not on net income. The Department of Revenue maintains more than 50 classifications, each with its own rate, so the rate depends on your activity. A small business B&O tax credit reduces or eliminates the tax for the smallest filers.

Can an LLC reduce self-employment tax in Washington?

Not by itself. A default-taxed LLC is disregarded or a partnership, so all net profit remains self-employment income. Only an S-corp election on IRS Form 2553 splits profit into W-2 wages, which carry employment tax, and distributions, which do not - and it requires payroll and a defensible reasonable salary.

Do I need to make quarterly estimated payments in Washington?

Yes, to the IRS. No one withholds from your business income, so the IRS expects quarterly estimated payments covering both income tax and the 15.3% self-employment tax. Paying only in April generally triggers an underpayment penalty. Washington itself has separate B&O and sales tax filing schedules through the Department of Revenue.

Sources

IRS - Self-Employment Tax (Social Security and Medicare Taxes) (15.3% rate; 12.4% Social Security and 2.9% Medicare; $400 threshold; deduction for the employer-equivalent portion).
IRS - About Schedule SE (Form 1040) (computation of self-employment tax).
IRS - About Schedule C (Form 1040) (business profit or loss).
IRS - Estimated Taxes (quarterly payment requirement).
IRS - Questions and Answers for the Additional Medicare Tax (0.9% tax; filing-status thresholds).
IRS - Limited Liability Company (LLC) (federal tax classification).
IRS - About Form 2553 (S corporation election).
Washington Department of Revenue - Business & Occupation Tax (gross receipts tax; more than 50 classifications; small business B&O credit).
Washington Department of Revenue - Business and Occupation Tax Industry Guide (how B&O applies by activity).
Legal Information Institute (Cornell) - 26 U.S.C. 1401 (rate of self-employment tax).
Legal Information Institute (Cornell) - 26 U.S.C. 1402 (net earnings from self-employment; $400 threshold).
Legal Information Institute (Cornell) - 26 CFR 301.7701-3 (entity classification election).

LegalGlass provides general information for educational purposes and is not legal advice, is not a law firm, and is not a substitute for advice from a licensed attorney or tax professional. Laws, fees, and thresholds change; verify current amounts with the IRS and the Washington Department of Revenue before acting.