Self-employment tax when salary income over threshold for 2025 filing?

You're asking a great question! When you have both W-2 employment and self-employment income, the Social Security tax portion does indeed have a maximum threshold ($168,600 for 2025), but the Medicare portion has no limit. Here's how it works: If your W-2 job already withholds Social Security tax on $127,000, then only about $41,600 of your self-employment income would be subject to the Social Security portion (6.2%) of the self-employment tax. However, your entire self-employment income will still be subject to the Medicare portion (2.9%) of the self-employment tax. The good news is that when you file your taxes, you'll get credit for any excess Social Security tax that was withheld between both income sources if they exceed the maximum. Also remember that you can deduct half of your self-employment tax on your income tax return, which helps offset some of the cost.

I was in almost the exact same situation last year and found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out my self-employment tax situation. I was so confused about the thresholds and what I owed on my software consulting income since I was close to the Social Security limit from my regular job. What I liked is that it analyzed my specific income situation and showed me exactly how much of my self-employment income would be subject to just Medicare vs. both Social Security and Medicare tax. It also helped me identify business deductions I was missing that lowered my taxable self-employment income by about $4,800. Definitely made me feel less stressed about the whole situation.

Just wanted to follow up about my experience with taxr.ai after trying it based on this thread. It was actually really helpful! I uploaded my W-2 and my self-employment records, and it immediately showed me that I only needed to pay about 3.8% in self-employment tax instead of the full 15.3% because my day job already had me close to the Social Security limit. The tool found several deductions I would have missed (like a portion of my home internet and cell phone) and even calculated the QBI deduction which I didn't even know applied to me. Ended up saving around $2,100 compared to what I thought I'd owe. Definitely less stressful than my usual tax panic!

If you're having trouble getting clear answers about your self-employment tax situation, I highly recommend using Claimyr (https://claimyr.com) to actually speak with an IRS agent directly. I struggled for weeks trying to figure out how my W-2 income affected my self-employment tax obligations, and online calculators kept giving me different numbers. I was skeptical at first, but Claimyr got me connected to an actual IRS representative in about 15 minutes when I had been trying for days on my own. There's a video that shows how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly how the Social Security threshold works between multiple income sources and confirmed I only needed to pay the 2.9% Medicare portion on my freelance income since my primary job had already maxed out my Social Security contributions. Saved me from overpaying by quite a bit!

I have to admit I was completely wrong about Claimyr. After ranting about it being a scam, I was desperate enough to try it yesterday after getting another CP2000 notice about my self-employment taxes from 2023. To my absolute shock, I was connected to an IRS agent in less than 20 minutes. The agent was able to look up my account, confirm that I had actually calculated my self-employment tax correctly (I only owed the Medicare portion since my W-2 job already exceeded the Social Security limit), and they're sending me a corrected notice. Would have saved me weeks of stress if I'd just tried this earlier instead of being stubbornly skeptical. Sometimes I hate being wrong, but in this case I'm glad I was!

Something nobody's mentioned yet - make sure you're making quarterly estimated tax payments on that self-employment income if you expect to owe more than $1000 at tax time! I learned this the hard way and got hit with an underpayment penalty my first year doing freelance work alongside my regular job.

Has anyone used the "Schedule SE" worksheet in the tax software? I found it super helpful because it automatically calculates how much self-employment tax you owe taking into account your W-2 income. Saved me a ton of math!

This is exactly the kind of situation I went through last year! The key thing to remember is that self-employment tax is calculated on your net earnings from self-employment (after business expenses), and the Social Security portion does have that annual wage cap. For 2025, the Social Security wage base is $168,600. Since you're making $127,000 from your W-2 job, you have about $41,600 of "room" left before hitting the cap. This means only the first $41,600 of your self-employment earnings would be subject to the 12.4% Social Security portion of SE tax. However, ALL of your self-employment income will be subject to the 2.9% Medicare portion since there's no cap on Medicare taxes. Don't forget that you can deduct legitimate business expenses (computer equipment, software subscriptions, portion of home office, etc.) before calculating your SE tax. Also, you'll be able to deduct half of your self-employment tax as an adjustment to income, which helps reduce your overall tax burden. I'd definitely recommend making quarterly estimated payments if you haven't already - the underpayment penalties can be painful!