US Self-Employment Tax Calculator

When you work for someone else, your employer pays half your Social Security and Medicare taxes (FICA, 7.65%). When you are self-employed, you pay both halves yourself - that is the 15.3% self-employment tax on top of regular federal and state income tax. On $80,000 of self-employment income, the SE tax alone is roughly $11,300, before any income tax.

There are two small consolations. First, you only pay SE tax on 92.35% of net self-employment income (a built-in adjustment that mimics the employer-side deduction). Second, you can deduct half the SE tax against your income for income-tax purposes. Neither offsets enough to feel painless; SE tax remains the single biggest financial surprise for new freelancers and contractors.

Self-employment tax is calculated on net profit, not gross revenue. Every legitimate business expense reduces both your income tax and SE tax bill. The big ones for solo workers: home office (simplified $5/sqft up to 300 sqft, or actual expense method), mileage (67 cents/mile in 2024), health insurance premiums (deduct above the line as adjustments to income), retirement plan contributions (Solo 401(k) up to $69,000 in 2024), and the qualified business income deduction (QBI) which can wipe out 20% of net business income.

Track expenses obsessively from day one. The single biggest mistake new freelancers make is paying SE tax on revenue rather than profit. A $100,000 freelance year with $25,000 of legitimate expenses saves about $3,500 in SE tax and another $5,000+ in income tax compared to ignoring deductions.

Without an employer to withhold, the IRS expects you to pay tax 4 times a year: April 15, June 15, September 15, January 15. Pay too little and you owe an underpayment penalty plus interest. The safe harbour is to pay either 90% of the current year's expected tax or 100% of last year's actual tax (110% if last year's AGI was over $150,000) - whichever is smaller.

Most accountants recommend setting aside 25-35% of each freelance payment in a separate savings account just for tax. Better to over-save and refund yourself in March than to scramble for cash in April. The [US Income Tax Calculator](/us-income-tax-calculator) can help estimate the income-tax portion separately.

Single-member LLC by default is a 'disregarded entity' for tax purposes - no change to how you file, just legal liability protection. The S-Corp election starts saving real money once net profit is above about $80,000. As an S-Corp, you pay yourself a 'reasonable salary' (subject to FICA via payroll), then take additional profit as a distribution that is not subject to SE tax.

The S-Corp savings on $150,000 of profit might be $5,000-8,000 a year vs filing as a sole proprietor or LLC. But you have to run actual payroll (or hire a service like Gusto), file a separate corporate tax return (Form 1120-S), and justify the salary level if audited. Do the maths carefully, or talk to a CPA, before electing S-Corp status.