How this number is made
Self-employment tax is both the employee and employer share of Social Security and Medicare, charged on most of your net profit. You then still owe federal income tax. One-half of the self-employment tax (not the extra 0.9% Medicare tax) comes off income before the brackets run.
- Use profit after ordinary business expenses, not your gross invoices.
- Add W-2 wages if you also have a job. They use up the Social Security wage base and can raise the income-tax bracket. Leave them at zero if this is your only income.
- Set the result aside through the year. Dividing by four is a rough quarterly habit, not the IRS estimated-tax worksheet.
Formula
Net earnings = profit × 0.9235. SE tax = 12.4% of net earnings up to the remaining Social Security wage base ($184,500 minus W-2 wages) plus 2.9% of net earnings. Income tax uses profit + W-2 wages − half of SE tax − the 2026 standard deduction.
Worked example
On $80,000 of profit with no W-2 wages, net earnings are $73,880. Both halves of Social Security and Medicare are a bit over $11,300. Half of that reduces income before the $16,100 standard deduction. Federal income tax is then figured on the remainder. The headline adds those pieces. It is not a finished return.
Questions
Why 92.35% and not the whole profit?
The code applies the tax to net earnings from self-employment, defined as 92.35% of net profit. That factor stands in for the employer half so the tax is not charged on itself.
Where is the 20% qualified business income deduction?
Not in this estimate. Many people who qualify pay less income tax because of it, and some do not qualify. Leaving it out makes the set-aside a little high on purpose.