How does self-employment income affect my Social Security and taxes after 60?

Self-employment tax is 12.4% for Social Security plus 2.9% for Medicare, 15.3% in total. It applies once net earnings reach $400, even if you already receive Social Security benefits. The tax is figured on 92.35% of net earnings, and you can deduct half of it when figuring adjusted gross income. In 2026 the Social Security part stops at $184,500 of combined wages and self-employment earnings. Higher earners may also owe a 0.9% Additional Medicare Tax.

Example: $30,000 of net profit. 92.35% of that is $27,705. At 15.3%, the tax is about $4,239, and about $2,119 of it is deductible. This is on top of regular income tax.

The tax buys something. Self-employment earnings earn Social Security credits the same way wages do, one credit per $1,890 in 2026, up to four a year. They also go into your earnings record, so a strong year can replace a low year in your highest 35 and raise your benefit.

If you claimed before full retirement age, the earnings test counts only your net earnings from self-employment, not gross receipts, and that income counts when you receive it. SSA also looks at hours: in general, more than 45 hours a month in your business means you are not retired, and fewer than 15 means you are.

What the rule of thumb misses: as an employee you paid half of this tax and your employer paid the rest. Working for yourself, you pay both halves, so the same gross pay nets less.