Freelance Self-Employment Tax Calculator
Estimated Tax Breakdown
Net Business Profit:
$0.00
Social Security Tax (12.4%):
$0.00
Medicare Tax (2.9%):
$0.00
Total Self-Employment Tax:
$0.00
*This calculation represents the 15.3% Self-Employment tax only. It does not include Federal or State Income Tax.
Understanding the Freelance Self-Employment Tax
If you work for yourself as a freelancer, independent contractor, or small business owner, the IRS considers you both the employer and the employee. Because of this, you are responsible for paying the full 15.3% Self-Employment (SE) tax, which covers Social Security and Medicare.
How the Calculation Works
The SE tax is not calculated on your gross revenue, but rather on your net profit. Here is the standard formula used by our calculator:
- Step 1: Determine Net Profit. Subtract your business expenses (supplies, software, office space) from your gross income.
- Step 2: Calculate Taxable SE Income. The IRS allows you to calculate SE tax on only 92.35% of your net profit.
- Step 3: Social Security. You pay 12.4% on the first $160,200 of your income (for the 2023-2024 tax years).
- Step 4: Medicare. You pay 2.9% on all taxable SE income, regardless of the amount.
Real-World Example
Let's say you earned $100,000 in revenue and had $20,000 in deductible expenses.
- Net Profit: $80,000
- Taxable Amount (92.35%): $73,880
- Social Security (12.4% of $73,880): $9,161.12
- Medicare (2.9% of $73,880): $2,142.52
- Total SE Tax: $11,303.64
Why Business Deductions Matter
Because the tax is based on net profit, every dollar you legitimately deduct as a business expense reduces your tax liability. Common deductions for freelancers include:
- Home office expenses (portion of rent/utilities)
- Professional services (Legal, Accounting)
- Marketing and advertising costs
- Hardware and software subscriptions
- Health insurance premiums
Quarterly Estimated Payments
Unlike traditional employees who have taxes withheld from every paycheck, freelancers usually need to pay their taxes in four installments throughout the year. These are known as quarterly estimated payments. Failure to pay enough tax throughout the year can result in "underpayment penalties" when you file your annual return.