Freelance Tax Calculator (US Self-Employment)
Estimate your 2024 self-employment and federal income tax liability.
How to Calculate Self-Employment Tax
Working for yourself offers freedom, but it also means you are responsible for both the employer and employee portions of Social Security and Medicare taxes. This is commonly known as the Self-Employment (SE) Tax.
The current SE tax rate is 15.3%. This is broken down into 12.4% for Social Security and 2.9% for Medicare. Unlike W-2 employees who only pay half (the employer pays the other half), freelancers cover the full amount. However, the IRS allows you to calculate this tax on only 92.35% of your net business earnings.
Understanding Business Deductions
To reduce your tax bill, you must accurately track business expenses. Your Net Profit is your Gross Income minus your business-related expenses (software, equipment, home office costs, marketing). For example, if you earned $100,000 but spent $20,000 on expenses, you are only taxed on the $80,000 profit.
Federal Income Tax Brackets
After calculating your SE tax, you must also pay standard Federal Income Tax. One benefit of being self-employed is that you can deduct 50% of your SE tax from your gross income when calculating your Adjusted Gross Income (AGI). This lowers the amount of income subject to standard income tax brackets.
Quarterly Estimated Payments
Because there is no employer to withhold taxes from your paycheck, the IRS requires most freelancers to make Estimated Tax Payments four times a year. Failure to pay enough tax throughout the year can lead to underpayment penalties. Use this calculator to set aside roughly 25-30% of your income for tax season.