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Self-Employment Tax Calculator
First year freelancing and you're about to learn what 15.3% self-employment tax plus federal income tax plus state tax feels like. Spoiler: it's 35-50% of your profit. Let's calculate how much to set aside so April doesn't destroy you.
Your Business Income
Tax Breakdown
💰 Quarterly Estimated Tax Payments
Per Quarter (pay 4 times/year):
Deadlines: April 15, June 15, Sept 15, Jan 15
Set aside 0% of every payment you receive
Self-Employment Tax: The Double FICA Hit
W-2 employees pay 7.65% FICA (Social Security 6.2% + Medicare 1.45%). Employers pay the other 7.65%. Total: 15.3%, split 50/50. Self-employed? You pay BOTH halves. All 15.3%. On top of regular income tax. This is the tax nobody warns you about.
💡 Real Talk from Priya Patel, CPA
New freelancer, first April: bloodbath. Client made $95k her first year, spent it all ("I'll deal with taxes later"). April 15: owed $14k SE tax + $16k income tax + $4.5k state = $34,500 total. Had $8k saved. Went on IRS payment plan at 8% interest. Took 18 months to pay off, cost her $2,700 in interest/penalties. Rule #1: Set aside 35% of EVERY payment the day you receive it. Transfer to separate savings account. Pretend it doesn't exist. This is not your money—it's the IRS's.
The SE Tax Formula
SE Tax = Net Profit × 92.35% × 15.3%
Why 92.35%? IRS gives you a deduction for half the SE tax you pay (employers get to deduct their 7.65% as a business expense, so you get an equivalent deduction). It's automatic—you don't have to do anything special.
Example:
- Gross income: $100,000
- Business expenses: -$15,000
- Net profit: $85,000
- SE taxable amount: $85k × 92.35% = $78,498
- SE tax: $78,498 × 15.3% = $12,010
That $12k is ON TOP OF income tax. If you're in the 22% federal bracket, you owe ~$16k income tax + $12k SE tax + state tax. Total: $30k-35k on $85k profit.
⚠️ Common Mistake: "I'll Just Pay Taxes in April"
IRS requires quarterly estimated payments if you'll owe >$1,000. Don't pay quarterly? Underpayment penalty: 3-8% of the shortfall. Example: Owe $28k total, paid $0 quarterly. Penalty: ~$1,500-2,000. Plus you're scrambling to find $28k in one month. Pay quarterly or Die April trying. Many people blow their tax refund on a vacation, then owe $25k the next year with no cushion. Ugly cycle.
Quarterly Estimated Tax Deadlines
Four payments per year:
- Q1 (Jan 1 - Mar 31): Due April 15
- Q2 (Apr 1 - May 31): Due June 15
- Q3 (Jun 1 - Aug 31): Due September 15
- Q4 (Sep 1 - Dec 31): Due January 15 (next year)
Notice Q2 is only 2 months and Q3 is 3 months. IRS logic makes zero sense. Just mark your calendar.
How to pay:
- Online: IRS.gov/payments (free, instant)
- Form 1040-ES: Mail a check (slow, risky)
- EFTPS.gov: Set up auto-pay (best for consistency)
What You CAN Deduct (Before SE Tax)
Reduce your net profit = lower SE tax. Legit deductions:
- Home office: Simplified method = $5/sq ft, up to 300 sq ft = $1,500 max. Or actual expenses (% of rent, utilities).
- Equipment: Laptop, desk, monitor, phone (business use only)
- Software/subscriptions: Adobe, Figma, Slack, website hosting
- Mileage: $0.67/mile (2024 rate) for business driving (NOT commuting to office you rent)
- Health insurance: Premiums are deducted on Form 1040 (separate from Schedule C), reduces income tax but not SE tax
- Marketing: Website, ads, business cards, networking events
- Professional fees: CPA ($500-2k), lawyer, software subscriptions
- Travel: Business trips (conferences, client meetings). Vacation mixed with work? Allocate % to business.
Example impact:
- $100k revenue - $20k legit expenses = $80k net profit
- SE tax on $80k: $11,316
- vs $100k net profit: SE tax $14,130
- Deductions save $2,814 in SE tax alone
Safe Harbor Rule: Avoid Penalties
Pay quarterly but still underpay? You're safe from penalties if you meet "Safe Harbor":
- Pay 100% of last year's total tax (110% if income >$150k)
- OR pay 90% of current year's tax
Example:
- 2024 tax bill: $25,000
- 2025 projected tax: $35,000
- If you pay $25k via quarterly payments (100% of prior year), no penalty even though you underpaid $10k
This is a lifesaver for volatile income—just match last year's number quarterly, deal with the difference in April.
Reviewed by Priya Patel, CPA
Freelancer Tax Specialist (7 Years, 300+ Clients)
Priya has saved freelancers $500k+ in tax penalties. Her advice? Set aside 35% of every payment immediately. Separate bank account. Auto-transfer. No exceptions.
Frequently Asked Questions
What is self-employment tax?
15.3% tax on net profit: 12.4% Social Security + 2.9% Medicare. W-2 employees pay half (7.65%), employer pays the other half. Self-employed pay BOTH halves. Calculated on 92.35% of net earnings (you get a small deduction). Example: $80k profit → $80k × 92.35% = $73,880 × 15.3% = $11,304 SE tax. This is ON TOP OF regular income tax (10-37% federal + state).
How do I pay quarterly estimated taxes?
IRS wants taxes paid as you earn. Four deadlines: Q1 (April 15), Q2 (June 15), Q3 (Sept 15), Q4 (Jan 15). Use Form 1040-ES or pay online at irs.gov/payments. Calculate: (Annual SE Tax + Income Tax + State Tax) ÷ 4. Example: Owe $25k total for year → $6,250 per quarter. Miss a payment? Underpayment penalty (3-5% on amount owed). Set aside 30-35% of every payment you receive.
Can I deduct business expenses?
YES. Deduct legitimate expenses from revenue BEFORE calculating SE tax. Common: home office (simplified $5/sq ft up to 300 sq ft), equipment/software, mileage ($0.67/mile 2024), health insurance premiums (deducted on 1040, not Schedule C), marketing, professional fees. Example: $100k revenue - $15k expenses = $85k net profit. SE tax on $85k, not $100k. Saves you $2,295 in SE tax alone. Keep receipts, use accounting software.
What happens if I don't pay quarterly?
Two bad outcomes: 1) Underpayment penalty: If you owe >$1,000 at tax time and didn't pay 90% during year, IRS charges 3-8% penalty on shortfall. 2) Massive April bill: Owe $20k-40k+ all at once, can't pay it, interest accrues monthly (currently 8%). Safe harbor: Pay 100% of last year's tax liability (110% if income >$150k) via quarterly payments = no penalty even if you underpaid.