Self-Employed? Your Real Payroll Cost Is More Than Your Own Paycheck
As a self-employed business owner, there's no employer withholding Social Security and Medicare for you โ instead, you pay Self-Employment (SE) tax, which covers both the "employee" and "employer" shares at a combined 15.3% (12.4% Social Security up to the annual wage base, plus 2.9% Medicare with no cap, plus an extra 0.9% Additional Medicare Tax above $200,000). If you hire employees, you also become responsible for matching 7.65% of each employee's wages in FICA taxes on top of the wages themselves. Add in health insurance โ which the self-employed typically buy on their own through the ACA Marketplace since there's no employer plan โ and the real cost of running your business is significantly higher than the paycheck numbers alone suggest.
| Cost | Who Pays | Rate |
|---|---|---|
| Self-Employment Tax | You (both halves) | 15.3% of 92.35% of net income |
| Employer FICA Match | You, per employee | 7.65% of employee wages |
| Health Insurance | You | ACA Marketplace premium |
This is a simplified federal estimate that uses the 2025 Social Security wage base and doesn't account for the deduction for half of your SE tax, state taxes, or ACA premium tax credits you might qualify for. Confirm current-year figures and consult a tax professional or payroll provider before budgeting for hires.
Frequently Asked Questions
Yes, through Self-Employment tax, which is 15.3% covering both the employee and employer shares.
You must match 7.65% of their wages in FICA taxes, on top of the wages you pay them.
No, it's separate โ most self-employed workers buy their own coverage through the ACA Marketplace.
โป Estimate only. Verify current-year wage base and tax rates.