Self-Employment Tax for TLC Drivers Explained

In short: self-employment tax is Social Security and Medicare tax for people who work for themselves — and as a lease, owner or app driver you are usually one of them. The rate is 15.3% (12.4% Social Security + 2.9% Medicare), and you owe it if your net earnings from self-employment are $400 or more (IRS). It is figured on your profit, not your gross, so every legitimate deduction lowers it.

An employee splits these taxes with the employer and has them withheld. You pay both halves yourself, usually through quarterly estimated payments. This page shows how it is calculated. It is general information, not tax advice.

Does it apply to you?

You pay self-employment tax on income from working for yourself. New York State's self-employment page says you are self-employed if you "generate income through the internet or using an app (rideshare, food or product delivery) as a gig economy worker," or offer services to the public while controlling how the work is done (NYS Tax). The IRS's gig economy pages treat app drivers' income as business income. Lease taxi drivers and owner-drivers who report on Schedule C are in the same position.

If you are paid as an employee with a W-2, your employer withholds Social Security and Medicare from those wages, and SE tax does not apply to that pay. Status for unemployment insurance is decided under separate rules. If you have had a ruling about your status, or you have both W-2 and 1099 driving income, ask a preparer how to file.

The IRS also notes that the self-employment tax rules apply no matter how old you are, even if you already receive Social Security or Medicare.

How it is calculated, step by step

The 92.35% factor and the 15.3% rate are the figures in TLC Help's rates file (as of 2026-10-12), from the IRS self-employment tax page and Schedule SE. The 2026 wage base is from the Social Security Administration's notice in the Federal Register: "$184,500 for remuneration paid in 2026 and self-employment income earned in tax years beginning in 2026."

A worked example (fictional)

Marco drives for an app. After car costs, tolls and fees, his Schedule C profit for the year is $40,000. He has no other job.

This is on top of his federal, NYS and NYC income tax.

A small-profit example. Ana drove a few weekends and, after car costs, had a profit of $420. Net earnings are $420 × 92.35% = about $388 — under $400 — so under the IRS rule she owes no self-employment tax for the year, though the income still goes on her return. If Marco had used the wrong car method and claimed $1,000 less in expenses, his SE tax alone would be about $141 higher ($1,000 × 92.35% × 15.3%).

Why the deduction for half doesn't lower SE tax

The IRS is explicit: the deduction for the employer-equivalent half "only affects your income tax. It does not affect either your net earnings from self-employment or your self-employment tax" (IRS). The same goes for other below-the-line items. For example, the IRS pages we read describe the 2025–2028 no tax on tips deduction as a deduction against income and don't say it reduces SE tax.

The wage base cap and drivers with a W-2 job

The 12.4% Social Security part applies only up to the year's wage base — $184,500 for 2026 — counting your wages, tips and self-employment earnings together. If you also have a W-2 job, the wages there use up part of that cap first. The 2.9% Medicare part has no cap (IRS).

Additional Medicare Tax: an extra 0.9% applies when wages and self-employment income are above $200,000 (single, head of household or qualifying surviving spouse), $250,000 (married filing jointly) or $125,000 (married filing separately).

Paying it during the year

Self-employment tax is not collected from your weekly payouts, so it adds to the amount you owe at filing time. The IRS says estimated tax payments are used to pay "not only income tax, but other taxes such as self-employment tax" (IRS). In Marco's example, the $5,651.82 of SE tax alone is more than the $1,000 level at which the IRS generally expects estimated payments. Spreading it over the four due dates — April 15, June 15 and September 15, 2026, and January 15, 2027 — is easier than one large bill in April.

Legal ways to lower it

Because SE tax follows profit, the honest way to lower it is to make sure your expenses are complete and correct:

• Pick the better car method. The IRS mileage rate (72.5¢ Jan–Jun 2026, 76¢ from July 1) or actual costs — see standard mileage vs actual expenses.
• Count tolls and business parking you weren't paid back for.
• Separate app fees that are inside your 1099-K gross — see your 1099-K vs what you earned.
• Use the full list of driver deductions: TLC driver deductions list.

The estimator shows the rough SE-tax effect of choosing one car method over the other. It is only right while your earnings are under the wage base.

Where it shows up for drivers

• Schedule SE with your Form 1040; the tax is added to your total federal tax.
• Estimated payments: the IRS says estimated tax covers self-employment tax too — so your quarterly payments must include it.
• New York's MCTMT uses a similar base: net earnings from Schedule SE Part 1 line 6, but without the Social Security cap (NYS). See MCTMT.
• Your future Social Security: these taxes are how a self-employed driver pays into Social Security and Medicare.
• Earned Income Tax Credit: the IRS notes that if you file Form 1040 with Schedule C you may be eligible for the EITC; its EITC Assistant checks eligibility.

You need a Social Security number or an ITIN to pay self-employment tax, the IRS says. Other NYC business tax: UBT. The full map: taxes for Uber and Lyft drivers in NYC.