Self-Employed Workers Get Social Security Based on 92.35% of Earnings, Not 15.3% Tax Paid
Updated
Updated · Yahoo Finance · Aug 17
Self-Employed Workers Get Social Security Based on 92.35% of Earnings, Not 15.3% Tax Paid
3 articles · Updated · Yahoo Finance · Aug 17
Summary
Social Security counts a freelancer’s covered earnings—not the full self-employment tax check—when calculating retirement benefits, so paying both employer and employee shares does not boost the payout.
For self-employed workers, covered earnings are generally 92.35% of net business income after expenses; a W-2 worker and a freelancer with the same 35-year earnings record can receive similar benefits.
The extra tax burden mainly reflects that freelancers pay the employer share themselves. Tax relief comes through a deduction for half the self-employment tax, not through added Social Security credit.
That makes reported income the key retirement lever: aggressive deductions can lower future benefits, while earnings above the 2026 wage base of $184,500 add no further Social Security benefit.
A 2.8% 2026 COLA will raise current benefits equally for retirees from payroll jobs and sole proprietorships, underscoring that the system rewards credited earnings rather than who wrote the tax check.