How Freelance & Self-Employment Taxes Work
As a freelancer or independent contractor, you pay self-employment (SE) tax on top of regular income tax. SE tax covers Social Security (12.4%) and Medicare (2.9%) — totaling 15.3% — which employees normally split with their employer. As a self-employed person, you pay the full 15.3% yourself, though you can deduct half of it from your taxable income.
The Quarterly Estimated Tax Requirement
Freelancers don't have taxes withheld from paychecks, so the IRS requires you to pay estimated taxes quarterly. Miss these payments and you'll face underpayment penalties. The due dates are typically: April 15, June 15, September 15, and January 15. Use this calculator to estimate each quarterly payment.
Deductions That Reduce Your Tax Bill
- Home office deduction — Dedicated workspace in your home (simplified method: $5/sq ft up to 300 sq ft)
- Equipment and software — Computers, cameras, subscriptions used for work
- Health insurance premiums — 100% deductible if you're self-employed and not eligible for employer coverage
- Retirement contributions — Solo 401(k) or SEP-IRA lets you shelter up to $69,000/year (2025)
- Half of SE tax — You deduct 50% of your self-employment tax from gross income
- Business mileage — 67 cents per mile (2024 rate) for business travel
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File Your Freelance Taxes With Confidence
Tax software designed for self-employed people handles Schedule C, SE tax, and quarterly estimates automatically.
Frequently Asked Questions
How much should I set aside for taxes as a freelancer?
A safe rule of thumb is to set aside 25–30% of every payment you receive. This covers federal income tax, self-employment tax, and potentially state income tax. Open a separate savings account and transfer that percentage immediately when paid — don't let it mix with spending money.
Do I need to pay self-employment tax if I earn under a certain amount?
You must pay self-employment tax if your net self-employment income is $400 or more in a year. There's no minimum threshold for filing a return if you have SE income — even small freelance income must be reported.
What is a 1099 form?
A 1099-NEC (previously 1099-MISC) is the form clients send when they paid you $600 or more during the year. You're required to report all self-employment income even if you don't receive a 1099 — the IRS expects you to track and report it yourself.
Should I form an LLC or S-Corp as a freelancer?
At lower income levels (under $40,000 net), a sole proprietorship is simplest and costs nothing. An LLC provides liability protection but doesn't change your taxes by default. An S-Corp election can save significant SE taxes once you earn $60,000+ net — consult a CPA to determine when it makes sense for your situation.