The IRS's Schedule SE fixes a 15.3 percent rate with one capped half

The workload

For a solo founder operating as a sole proprietor, the workload the IRS's instructions describe is a specific calculation, not a flat bill. Verified: the 2025 Instructions for Schedule SE (Form 1040), retrieved 16 September 2026, state a taxpayer must file Schedule SE once net self-employment earnings reach "$400 or more" for the year. The Schedule SE form walks through the required steps: multiply net earnings by 92.35 percent for the taxable base, apply separate rates for Social Security and Medicare, then deduct half the resulting tax. This is arithmetic a founder or preparer must run every filing year, since the wage-base threshold changes annually.

What the documents show

Verified: the Schedule SE form states the calculation is to "multiply line 3 by 92.35% (0.9235)" to find net earnings subject to the tax, then "multiply the smaller of line 6 or line 9 by 12.4% (0.124)" for the Social Security portion, and separately "multiply line 6 by 2.9% (0.029)" for Medicare, a combined 15.3 percent rate on the 92.35-percent base, before any cap. Verified: the 2025 instructions state "the maximum amount of self-employment income subject to social security tax is $176,100," applying only to the 12.4 percent portion; the 2.9 percent Medicare portion has no upper limit, and the form notes a 0.9 percent Additional Medicare Tax can apply above certain thresholds. The form also allows a deduction: "multiply line 12 by 50%," so half the calculated tax is deductible from income for other tax purposes. This calculation applies to sole proprietors and single-member LLCs; it does not apply the same way to a founder paid as their own corporation's employee, where the two taxes are instead split between employer and employee withholding under different forms.

The operating cost

Verified: the combined rate is 15.3 percent of 92.35 percent of net earnings, up to the $176,100 wage base for 2025, with the Medicare share continuing above that with no cap. Half of the total is deductible, per the form's line 13, lowering the net annual cost somewhat below the full 15.3 percent figure.

The stop condition

The instructions name a stop condition for the capped portion only: once cumulative earnings for the year exceed $176,100, the 12.4 percent portion stops applying to further income that year. Editorial: there is no stop condition for the obligation itself, it recurs every year a sole proprietor has $400 or more in net earnings, and incorporating changes which form applies rather than removing the tax.

• Is this founder filing as a sole proprietor or single-member LLC, where Schedule SE applies, or as their corporation's employee, where it does not?
• What was 2025's wage-base threshold compared with the prior year's, and how did that change the calculation?
• Has this founder's break-even math already priced in the deductible half of this tax, or only the full 15.3 percent?

The self-employment tax is a recurring cost with a stated formula and a cap on only one component. A founder's own math should show the 92.35 percent base, the 15.3 percent rate, the $176,100 cap, and the 50 percent deduction, not a rounded guess.