Estimate your 15.3% SE tax (Social Security & Medicare)
Net Profit:$0.00
Taxable SE Income (92.35% of Profit):$0.00
Social Security Portion (12.4%):$0.00
Medicare Portion (2.9%):$0.00
Total Estimated SE Tax:$0.00
Understanding Self-Employment Tax for Freelancers
If you work for yourself, you are considered both the employer and the employee. This means that instead of having Social Security and Medicare taxes split between you and a company, you are responsible for the full 15.3%—known as the Self-Employment Tax (SE Tax). This calculator helps you estimate that liability so you can set aside enough money for your quarterly estimated payments.
How the Self-Employment Tax is Calculated
The SE tax rate is 15.3%, which consists of two parts:
Social Security: 12.4% on the first $160,200 of your net earnings (for 2023, adjusted annually).
Medicare: 2.9% on all of your net earnings.
The IRS does not tax 100% of your profit. Instead, it taxes 92.35% of your net earnings. This adjustment is meant to mimic the deduction that employers get for paying their half of payroll taxes.
The Step-by-Step Formula
Calculate Net Profit: Gross Income – Business Expenses.
Calculate Taxable Amount: Net Profit × 0.9235.
Calculate SE Tax: Taxable Amount × 0.153.
Realistic Example: The Freelance Graphic Designer
Let's say Sarah earned $75,000 in gross revenue last year. She spent $10,000 on software subscriptions, a new laptop, and office rent.
Net Profit: $65,000
Taxable SE Income: $65,000 × 0.9235 = $60,027.50
Social Security (12.4%): $7,443.41
Medicare (2.9%): $1,740.80
Total SE Tax: $9,184.21
Note: This is separate from Federal and State Income Tax, which Sarah must also pay on her adjusted gross income.
Why Business Expenses Matter
As a freelancer, your business expenses directly reduce your tax liability. Every dollar you legitimately spend on your business reduces your "Net Profit," which in turn reduces the amount subject to the 15.3% SE tax. Common deductible expenses include home office costs, equipment, advertising, and professional insurance.
Important Tax Deadlines
Freelancers usually don't wait until April 15th to pay their taxes. The IRS requires Quarterly Estimated Tax Payments if you expect to owe $1,000 or more. These typically fall on: