When you work for an employer, Social Security and Medicare are taken out of your paycheck and your employer pays a matching amount. When you are self-employed (you are your own employer), no one withholds them for you. You pay them directly to the IRS with Form 1040-SS, "U.S. Self-Employment Tax Return."
This applies in Puerto Rico even though, as a bona fide resident, your income from the island is not subject to federal income tax. These are two different things: income tax (which goes to the Departamento de Hacienda, Puerto Rico's Treasury Department, "Hacienda") and Social Security and Medicare tax (which goes to the IRS and makes you eligible for benefits). If you need to review your obligations with Hacienda, read our guide for self-employed workers.
Who must file Form 1040-SS
According to the 2025 Form 1040-SS instructions, you must file it if you meet all three conditions:
- You, or your spouse if you file jointly, had net self-employment earnings of $400 or more.
- You are not required to file Form 1040 with the United States.
- You are a bona fide resident of Puerto Rico (or of another U.S. territory).
If you must file Form 1040 because you have income from outside Puerto Rico, self-employment tax is calculated on Schedule SE as part of Form 1040. We explain this in Puerto Rico residents and the IRS.
Your age does not matter. The tax applies even if you are older or already receive Social Security or Medicare.
Who is self-employed. If you have your own unincorporated business, practice a profession on your own or receive payments for services without being an employee, you are self-employed. You also pay on your share of certain partnerships. Form 1040-PR was discontinued. Since tax year 2023, Form 1040-SS is used, and it is also available in Spanish.
How it is calculated
- Net business profit. Business income minus business expenses, calculated on federal Schedule C.
- Base. Multiply net profit by 92.35%.
- Social Security. 12.4% of the base, up to the annual cap: $176,100 in 2025 and $184,500 in 2026, according to the Social Security Administration.
- Medicare. 2.9% of the entire base, with no cap.
The total is 15.3% of the base as long as you stay under the cap. In addition, the 0.9% Additional Medicare Tax applies to the part of your self-employment income, combined with your wages, that is over $200,000 if you are single or head of household, $250,000 if you are married filing jointly or $125,000 if you are married filing separately.
If you also have wages. The Social Security cap is a single cap for your wages and self-employment income combined. If your employer already withheld Social Security on part of it, Schedule SE takes that into account.
A self-employed graphic designer in Bayamón (hypothetical amounts) had net profit of $40,000 in 2026.
- Base: $40,000 × 92.35% = $36,940.00.
- Social Security: $36,940 × 12.4% = $4,580.56.
- Medicare: $36,940 × 2.9% = $1,071.26.
- Total tax on Form 1040-SS: $5,651.82.
- Half, $2,825.91, is the amount she could deduct on her Hacienda return.
A small income: with net profit of $3,000, the base is $2,770.50 and the tax would be $423.89.
What you get in return: Social Security credits
The Social Security Administration (SSA) uses the information on Form 1040-SS to record your earnings and calculate your benefits. You earn one credit for each set amount of covered earnings, up to four credits per year:
| Year | Earnings per credit | For all four credits |
|---|---|---|
| 2025 | $1,810 | $7,240 |
| 2026 | $1,890 | $7,560 |
According to the SSA, you need 40 credits to qualify for retirement benefits. If you do not file Form 1040-SS, those years do not count toward your record, even if you worked.
If you earned little or had a loss. The Form 1040-SS instructions say it may be worth filing anyway and using one of the optional methods on Schedule SE to report earnings and keep your credits. For 2025, the maximum income for using the optional methods was $7,240. For 2026, it is $7,560.
Write your name and Social Security number on Form 1040-SS exactly as they appear on your card. If you changed your name, notify the SSA first. That way you make sure your earnings are credited to your record.
How it relates to your Hacienda return
They are separate returns. Form 1040-SS goes to the IRS. The individual income tax return (planilla, Form 482) goes to Hacienda. Hacienda's 2025 instructions remind you that, if your self-employment income was $400 or more, you must also file Form 1040-SS with the IRS.
The 50% deduction. According to Hacienda's 2025 instructions, any individual engaged in a trade or business can deduct from gross income 50% of the federal self-employment tax paid to the IRS on income reported in the same year. You claim it in the business deductions section of the return. In the example, it would be $2,825.91.
The 10% withholding is not Social Security. The 10% withheld from some payments for services, reported on Form 480.6SP, is an advance on your Puerto Rico income tax. It does not pay your federal Social Security. See withholding and forms.
Deadlines and payments
- Deadline. For 2025, Form 1040-SS was due April 15, 2026. If you filed Form 4868 on time, you had an automatic extension to October 15, 2026, to file, but not to pay. For 2026, the general rule is April 15, 2027.
- Estimated payments. If you and your spouse expect to owe $1,000 or more in self-employment tax for 2026, you may have to make estimated payments during the year with Form 1040-ES.
- How to pay. The IRS recommends paying electronically, for example with IRS Direct Pay from your bank account or by card.
- If you pay late. The IRS charges interest from the original due date, a late-payment penalty of 0.5% per month, up to 25%, and a late-filing penalty of 5% per month, also up to 25%.
The same Form 1040-SS is used to claim the child tax credit. If you have qualifying children, the credit is applied against what you owe. Read about the child tax credit.
Frequently asked questions
Why do I owe the IRS if I do not pay federal income tax?
Because Social Security and Medicare tax is separate from income tax. Section 933 excludes your Puerto Rico income from income tax, but not from self-employment tax.
Do I file Form 1040-SS if I have a salaried job and a small weekend business?
Yes, if the business's net profit was $400 or more. Your employer already pays Social Security on your wages. Form 1040-SS covers the business income.
Can I deduct half of my Social Security tax with the IRS?
That deduction is an adjustment on the federal income tax return (Form 1040). If you only file Form 1040-SS, you have no federal income tax return to use it on. With Hacienda, you can deduct the 50%.
What happens if I have never filed Form 1040-SS?
Those years do not appear on your Social Security record, and you could owe the tax with interest and penalties. Talk with a CPA or a return preparer before filing past-due years.
Where can I do the math?
Use the self-employment tax calculator for an estimate, and confirm with the Form 1040-SS instructions or a professional.
Sources
- IRS, "Instructions for Form 1040-SS (2025)". irs.gov
- IRS, "Publication 570 (2025)". irs.gov
- Social Security Administration, "Contribution and benefit base". ssa.gov
- Social Security Administration, "Quarter of coverage". ssa.gov
- Social Security Administration, "How you earn credits". ssa.gov
- Departamento de Hacienda, "Folleto de instrucciones: planilla de contribución sobre ingresos de individuos 2025". hacienda.pr.gov
787TAX is an independent guide. It is not Puerto Rico's Departamento de Hacienda, the CRIM or the IRS. This page is general information, not tax or legal advice. Example figures are hypothetical. Found an error? Tell us.
