Business License Guide

Guide for LLC owners

LLC Self-Employment Tax Guide - 15.3% SE Tax, S-Corp Election, and State Notes (2024)

LLC self-employment tax guide covering the 15.3% SE tax, 2024 Social Security wage base, Schedule 1 deduction, S-corp salary/distribution split, C-corp FICA comparison, and state notes.

Last verified: 2026-05-08 Official sources linked below

Time to complete

No activation filing. The obligation exists when the LLC has net self-employment earnings.

Steps

6

Timing note

S-corp election timing, payroll setup, and retirement-plan setup can change the calculation for future periods.

Before you start

What to know first

  • A default single-member LLC is disregarded for federal tax purposes, so active business profit usually lands on Schedule C and is subject to self-employment tax through Schedule SE.
  • The headline SE tax rate is 15.3% below the Social Security wage base: 12.4% Social Security plus 2.9% Medicare. For 2024, the Social Security wage base is $168,600. Above that base, the 12.4% Social Security portion stops, but the 2.9% Medicare portion continues.
  • Schedule SE first applies the net-earnings adjustment to 92.35% of net self-employment profit. A $100,000 Schedule C profit produces $92,350 of net earnings and about $14,130 of SE tax before income-tax effects.
  • One-half of SE tax is deductible above the line on Schedule 1 of Form 1040. It reduces adjusted gross income for income-tax purposes, but it does not erase the SE tax itself.
  • An LLC that elects S-corp tax status can split owner compensation between W-2 salary and distributions. FICA applies to reasonable W-2 salary; distributions are generally not subject to SE tax, which is why reasonable compensation is the core S-corp audit issue.
  • A C-corp does not create SE tax on dividends. Instead, wages paid to owner-employees are subject to employer and employee FICA, and dividends face corporate-level tax plus shareholder dividend tax.
  • There is no general state-level self-employment tax that mirrors federal SE tax. State income taxes can still apply to LLC earnings. California has State Disability Insurance rules and voluntary disability coverage options for some self-employed owners; New York taxes self-employment earnings through personal income tax and local resident taxes where applicable.
  • Self-employment tax planning should be tied to estimated payments, payroll setup, and retirement contributions. Reducing SE exposure with an S-corp can also change retirement-plan contribution math because employer contributions are tied to W-2 wages.

Documents

What you'll need

  • Schedule C or partnership Schedule K-1 showing active LLC income
  • Schedule SE attached to Form 1040
  • Schedule 1 of Form 1040 for the deductible one-half of SE tax
  • Form 2553 if electing S-corp tax status
  • Payroll records and Forms 941/W-2 if operating as an S-corp
  • State tax return and state disability/unemployment records where applicable

Process

Step by step

  1. Start with net active business profit Use Schedule C net profit for a disregarded single-member LLC, guaranteed payments and active partnership income for a multi-member LLC, or payroll records for an S-corp. SE tax applies to net earnings, not gross receipts.
  2. Apply the Schedule SE base and wage cap Multiply net self-employment income by 92.35%, then apply 15.3% up to the 2024 Social Security wage base of $168,600. Above the wage base, apply only the Medicare portion, plus Additional Medicare Tax when thresholds are exceeded.
  3. Claim the above-the-line deduction Schedule SE calculates the deductible employer-equivalent portion. Carry one-half of SE tax to Schedule 1 so AGI reflects the deduction.
  4. Compare default LLC treatment to S-corp payroll Model FICA on a reasonable salary plus distributions outside FICA. Savings exist only when the avoided SE tax exceeds payroll software, extra tax preparation, bookkeeping, and state-level costs.
  5. Compare S-corp treatment to C-corp treatment A C-corp pays employer FICA on wages and the owner pays employee FICA on wages, but dividends are not SE income. The tradeoff is possible double taxation and different benefit rules.
  6. Tie the result to quarterly payments SE tax is not withheld from owner draws. Include it in Form 1040-ES estimates unless W-2 withholding from an S-corp salary covers the safe harbor.

Costs

What it costs

Item Amount Notes
SE tax on $50,000 net profit About $7,065 $50,000 x 92.35% x 15.3%, all below the 2024 Social Security wage base.
SE tax on $100,000 net profit About $14,130 $100,000 x 92.35% x 15.3%; one-half, about $7,065, is deductible on Schedule 1.
Payroll software for S-corp owner salary $40-$80/month typical Used after an S-corp election to run reasonable W-2 salary, withhold FICA and income tax, and file payroll returns.
CPA S-corp breakeven analysis $300-$800 typical Models SE-tax savings against payroll, bookkeeping, Form 1120-S, and state costs.

FAQ

Common questions

What is the LLC self-employment tax rate for 2024?

The combined federal SE tax rate is 15.3% below the 2024 Social Security wage base of $168,600: 12.4% Social Security plus 2.9% Medicare. Above the wage base, the Social Security component stops and Medicare continues.

Can an LLC deduct self-employment tax?

Yes. The owner deducts one-half of SE tax above the line on Schedule 1 of Form 1040. The deduction reduces AGI for income-tax purposes; it does not reduce the SE tax calculation itself.

How does an S-corp election reduce SE tax?

The LLC pays the owner a reasonable W-2 salary subject to FICA, then distributes remaining profit outside SE tax. The salary must be defensible for the work performed.

Is SE tax the same as C-corp FICA?

Economically it is similar on wages, but the legal structure differs. C-corps pay employer FICA on wages and withhold employee FICA; dividends are not SE income but may face corporate and shareholder-level tax.

Do states charge self-employment tax?

Most states do not impose a separate SE tax. They may tax self-employment income through income tax, disability programs, local taxes, or entity-level taxes.

Provenance

Legal basis & official sources

Last verified 2026-05-08.

IRC Sections 1401 and 1402 impose SE tax on net earnings from self-employment. IRC Section 164(f) allows the deduction for one-half of SE tax. IRC Sections 3101 and 3111 govern employee and employer FICA. S-corp compensation rules are administered through Subchapter S and reasonable-compensation enforcement.

Direct filing portal: https://www.irs.gov/forms-pubs/about-schedule-se-form-1040

If you skip this

  • Omitting Schedule SE can trigger additional tax, penalties, and interest after the IRS matches Schedule C or K-1 income.
  • Forgetting the Schedule 1 deduction for one-half of SE tax overstates AGI and income tax.
  • Taking all S-corp profit as distributions with no reasonable salary can lead to wage reclassification, back payroll taxes, penalties, and interest.
  • Ignoring state income tax and state disability/unemployment rules can create separate notices even when federal SE tax is correct.

Official sources

§ A Related guides

§ B Building permits

§ C Companion tools

Disclaimer: Informational only, not legal or tax advice. Rules change, so confirm with a business attorney or CPA before you act.