Self-employment tax
Self-employment (SE) tax is 15.3% on net self-employment income up to $168,600 (2024), and 2.9% above that. It's made up of:
• Social Security: 12.4% (up to the $168,600 cap)
• Medicare: 2.9% (no cap)
• Additional Medicare: 0.9% (on income over $200,000 single / $250,000 married)
Unlike employees, who split this 50/50 with their employer, you pay all of it yourself. However, you can deduct half of your SE tax from your gross income, which reduces your income tax — but not the SE tax itself.
Example: $80,000 net freelance income × 15.3% = $12,240 SE tax.
• Social Security: 12.4% (up to the $168,600 cap)
• Medicare: 2.9% (no cap)
• Additional Medicare: 0.9% (on income over $200,000 single / $250,000 married)
Unlike employees, who split this 50/50 with their employer, you pay all of it yourself. However, you can deduct half of your SE tax from your gross income, which reduces your income tax — but not the SE tax itself.
Example: $80,000 net freelance income × 15.3% = $12,240 SE tax.
The standard rule of thumb: set aside 25–30% of every payment you receive if you're a freelancer or self-employed. This covers federal income tax + self-employment tax for most people.
More precisely:
• SE tax: ~14.1% (after the half-SE-tax deduction)
• Federal income tax: 10–22% depending on your bracket
• State income tax: 0–13% depending on your state
If you earn $60,000 net, setting aside 30% = $18,000 reserve. At tax time, you'll pay SE tax (~$8,500) + federal income tax (~$7,000 at 22% bracket after standard deduction) = ~$15,500. The buffer is intentional — better to owe nothing and have cash left over.
More precisely:
• SE tax: ~14.1% (after the half-SE-tax deduction)
• Federal income tax: 10–22% depending on your bracket
• State income tax: 0–13% depending on your state
If you earn $60,000 net, setting aside 30% = $18,000 reserve. At tax time, you'll pay SE tax (~$8,500) + federal income tax (~$7,000 at 22% bracket after standard deduction) = ~$15,500. The buffer is intentional — better to owe nothing and have cash left over.
🧾 Self-Employment Tax Calculator
Enter your freelance or 1099 income and get your exact SE tax and total tax estimate.
Quarterly estimated taxes
The IRS operates on a pay-as-you-go system. Employees have taxes withheld from each paycheck. Freelancers and self-employed people have to do this themselves by making quarterly estimated tax payments.
You must pay quarterly estimates if you expect to owe $1,000 or more in federal tax for the year and your withholding doesn't cover it.
2025 quarterly due dates:
• Q1 (Jan–Mar): April 15
• Q2 (Apr–May): June 16
• Q3 (Jun–Aug): September 15
• Q4 (Sep–Dec): January 15, 2026
Missing a payment — or paying too little — results in an underpayment penalty from the IRS, even if you pay the full amount by April 15.
You must pay quarterly estimates if you expect to owe $1,000 or more in federal tax for the year and your withholding doesn't cover it.
2025 quarterly due dates:
• Q1 (Jan–Mar): April 15
• Q2 (Apr–May): June 16
• Q3 (Jun–Aug): September 15
• Q4 (Sep–Dec): January 15, 2026
Missing a payment — or paying too little — results in an underpayment penalty from the IRS, even if you pay the full amount by April 15.
Two safe methods to avoid penalties:
Method 1 — Pay 90% of current year tax: Estimate your total tax for the year, divide by 4, pay each quarter.
Method 2 — Pay 100% of last year's tax (safe harbor): If your prior-year AGI was ≤ $150,000, pay 100% of last year's total tax in equal quarterly installments. If AGI was over $150,000, pay 110% of last year's tax. This method protects you from penalties even if you end up owing more.
Most freelancers use the safe harbor method because it's predictable and simple. Use our quarterly tax calculator to find your exact payment.
Method 1 — Pay 90% of current year tax: Estimate your total tax for the year, divide by 4, pay each quarter.
Method 2 — Pay 100% of last year's tax (safe harbor): If your prior-year AGI was ≤ $150,000, pay 100% of last year's total tax in equal quarterly installments. If AGI was over $150,000, pay 110% of last year's tax. This method protects you from penalties even if you end up owing more.
Most freelancers use the safe harbor method because it's predictable and simple. Use our quarterly tax calculator to find your exact payment.
W-2 vs. 1099 — the real difference
W-2 (employee): Your employer withholds income tax, Social Security, and Medicare from your paycheck. They also pay half of Social Security and Medicare (7.65%) on your behalf. You get a W-2 form in January.
1099 (contractor/freelancer): No withholding. You receive the full amount but owe all of SE tax yourself (15.3%), plus income tax. You get a 1099-NEC if paid $600+ from a single client.
On a $100,000 equivalent:
• W-2 employee: Employer pays an extra ~$7,650 in payroll tax you never see. You take home ~$72,000–76,000 after withholding.
• 1099 contractor: You receive $100,000 but owe $15,300 SE tax + income tax. Take-home is comparable or slightly less — but you may have more deduction opportunities.
Compare both scenarios with our W-2 vs. 1099 calculator.
1099 (contractor/freelancer): No withholding. You receive the full amount but owe all of SE tax yourself (15.3%), plus income tax. You get a 1099-NEC if paid $600+ from a single client.
On a $100,000 equivalent:
• W-2 employee: Employer pays an extra ~$7,650 in payroll tax you never see. You take home ~$72,000–76,000 after withholding.
• 1099 contractor: You receive $100,000 but owe $15,300 SE tax + income tax. Take-home is comparable or slightly less — but you may have more deduction opportunities.
Compare both scenarios with our W-2 vs. 1099 calculator.
Tax brackets & deductions
Federal income tax uses a progressive bracket system — you only pay the higher rate on income that falls within that bracket, not on your full income.
These are taxable income brackets — after your standard deduction ($15,000 for single / $30,000 for married in 2025).
| Rate | Single filer | Married filing jointly |
|---|---|---|
| 10% | $0 – $11,925 | $0 – $23,850 |
| 12% | $11,926 – $48,475 | $23,851 – $96,950 |
| 22% | $48,476 – $103,350 | $96,951 – $206,700 |
| 24% | $103,351 – $197,300 | $206,701 – $394,600 |
| 32% | $197,301 – $250,525 | $394,601 – $501,050 |
| 35% | $250,526 – $626,350 | $501,051 – $751,600 |
| 37% | Over $626,350 | Over $751,600 |
The standard deduction reduces your taxable income automatically — no receipts needed. In 2025:
• Single: $15,000
• Married filing jointly: $30,000
• Head of household: $22,500
Itemizing means adding up deductions like mortgage interest, state and local taxes (SALT, capped at $10,000), charitable contributions, and large medical expenses. You itemize only if your total exceeds the standard deduction.
After the 2017 tax law roughly doubled the standard deduction, about 90% of taxpayers take the standard deduction. If you own a home with a large mortgage, you're most likely to benefit from itemizing.
• Single: $15,000
• Married filing jointly: $30,000
• Head of household: $22,500
Itemizing means adding up deductions like mortgage interest, state and local taxes (SALT, capped at $10,000), charitable contributions, and large medical expenses. You itemize only if your total exceeds the standard deduction.
After the 2017 tax law roughly doubled the standard deduction, about 90% of taxpayers take the standard deduction. If you own a home with a large mortgage, you're most likely to benefit from itemizing.
Capital gains tax depends on how long you held the asset:
Short-term gains (held < 1 year): taxed as ordinary income — same as your regular tax bracket.
Long-term gains (held ≥ 1 year): preferential rates:
• 0%: Single up to $48,350 / Married up to $96,700
• 15%: Single $48,351–$533,400 / Married $96,701–$600,050
• 20%: Single over $533,400 / Married over $600,050
Holding an investment for one year and one day instead of selling it at 364 days can dramatically reduce your tax bill. Use our capital gains calculator to compare scenarios.
Short-term gains (held < 1 year): taxed as ordinary income — same as your regular tax bracket.
Long-term gains (held ≥ 1 year): preferential rates:
• 0%: Single up to $48,350 / Married up to $96,700
• 15%: Single $48,351–$533,400 / Married $96,701–$600,050
• 20%: Single over $533,400 / Married over $600,050
Holding an investment for one year and one day instead of selling it at 364 days can dramatically reduce your tax bill. Use our capital gains calculator to compare scenarios.
Tax calculators