The Deductible Half of Self-Employment Tax (Schedule 1, Line 15)

If you pay self-employment tax, the IRS lets you deduct one-half of that tax when you figure adjusted gross income. It shows up on Schedule 1 (Form 1040), line 15 — “Deductible part of self-employment tax” — and you compute the amount on Schedule SE. This is an above-the-line adjustment: you get it whether you itemize or take the standard deduction.

This guide explains what the deduction does for tax year 2026, the trap people hit (it does not reduce the SE tax itself), how it interacts with AGI and the QBI deduction, and a simple way to estimate it. Rules and rates come from IRS Topic 554, Schedule SE / Schedule 1, and the SSA’s 2026 wage base.

What the deductible half is

Self-employment tax is Social Security and Medicare on your net earnings from self-employment — generally 12.4% + 2.9% = 15.3% applied to 92.35% of net profit (Topic 554). Employees and employers each pay half of those payroll taxes; when you’re self-employed you pay both halves, so Congress lets you deduct the “employer-equivalent” half against income tax.

Per Topic 554: when you figure AGI on Form 1040, you can deduct one-half of the self-employment tax. You calculate that deduction on Schedule SE and report it on Schedule 1.

It does NOT reduce self-employment tax

This is the most common mix-up. The deductible half:

• Does lower your income tax by shrinking adjusted gross income.
• Does not lower the 15.3% SE tax you compute on Schedule SE. You still owe the full SE tax; you just get an income-tax adjustment for half of it.

Think of it as a partial income-tax offset for paying both the “employee” and “employer” shares — not a discount on the SE bill itself. When you set money aside, keep SE tax on the full Schedule SE amount. Our self-employment tax calculator and how to calculate self-employment tax guide show both the SE tax and the deductible half side by side.

How to estimate it (2026)

For most sole proprietors with net profit well under the Social Security wage base and no W-2 wages eating into that base:

1. Net earnings ≈ net profit × 0.9235.
2. SE tax ≈ net earnings × 0.153 (or split 12.4% / 2.9% if you’re near the wage base).
3. Deductible half ≈ SE tax × 0.5.

A quick shortcut many people use: net profit × 0.9235 × 0.153 × 0.5 ≈ net profit × about 7.065% — that’s a rough estimate of the deductible half when the full 15.3% applies and you’re under the wage base.

Example: $75,000 net profit, no W-2 wages (2026).

• Net earnings: $75,000 × 0.9235 = $69,262.50
• Social Security: $69,262.50 × 12.4% = $8,588.55
• Medicare: $69,262.50 × 2.9% = $2,008.61
• SE tax ≈ $10,597
• Deductible half ≈ $5,299 → Schedule 1, line 15

If you also have W-2 wages, those count toward the $184,500 Social Security wage base first (SSA for 2026). High W-2 wages can wipe out the 12.4% piece on side income, which shrinks both SE tax and the deductible half. Medicare’s 2.9% still applies to net earnings with no wage-base cap.

Use the SE tax calculator or the 1099 tax calculator when wages, filing status, or profit near the wage base make a napkin estimate too rough. Background: self-employment tax explained.

Where you claim it

On a typical Form 1040 package:

• Figure SE tax on Schedule SE (attach Schedule 2 for the tax itself).
• Schedule SE also produces the deductible half.
• Enter that amount on Schedule 1 (Form 1040), line 15 — “Deductible part of self-employment tax. Attach Schedule SE.”
• Schedule 1 totals flow into Form 1040 and reduce AGI.

Software usually fills line 15 once Schedule SE is complete. Don’t invent a different percentage — follow Schedule SE for the year you’re filing.

AGI, brackets, and credits

Because the half deduction reduces AGI, it can:

• Lower the income that hits your tax brackets (after other adjustments and deductions).
• Affect AGI-based phaseouts for certain credits and deductions.
• Change how much you need to set aside for income tax — but again, not the SE tax itself.

For cash-flow planning, see how much to set aside for taxes. The half deduction is already baked into a full 1099 estimate on our 1099 tax calculator.

Interaction with the QBI deduction

Qualified business income (QBI) for the 20% deduction is generally your qualified business profit after certain related deductions — including the deductible half of self-employment tax, the self-employed health insurance deduction, and deductible retirement contributions for the business. So a larger SE tax (and thus a larger half deduction) slightly reduces the QBI you have left for the 20% deduction.

That trade-off is normal: you’re still better off claiming the half deduction. Details and 2026 thresholds: QBI deduction for freelancers (2026). Related above-the-line item: self-employed health insurance deduction.

Additional Medicare Tax is separate

The 0.9% Additional Medicare Tax (Topic 560 / Form 8959) can apply to self-employment income above $200,000 ($250,000 joint, $125,000 separate). It is not part of the self-employment tax on Schedule SE, and the deductible half on Schedule 1 line 15 is tied to Schedule SE — not to Form 8959. Don’t assume half of Additional Medicare Tax is deductible the same way.

Quick checklist

1. Compute SE tax on Schedule SE (92.35% rule, 12.4% / 2.9%, 2026 wage base $184,500).
2. Take one-half of that Schedule SE tax as the deductible amount.
3. Enter it on Schedule 1, line 15.
4. Remember: income tax goes down; SE tax does not.
5. Expect QBI to be reduced by this deduction when you figure the 20% QBI deduction.
6. Re-estimate quarterly set-asides if profit or W-2 wages change mid-year.

FAQ

Sources

• IRS Topic 554, Self-employment tax
• IRS: About Schedule SE (Form 1040), Self-Employment Tax
• IRS Instructions for Schedule SE (Form 1040)
• IRS Schedule 1 (Form 1040) PDF — line 15, deductible part of SE tax
• IRS Schedule SE (Form 1040) PDF
• SSA: Contribution and benefit base ($184,500 for 2026)
• IRS: Qualified business income deduction
• IRS Topic 560, Additional Medicare Tax
• IRS Rev. Proc. 2025-32 (2026 inflation adjustments)