What Is Self-Employment Tax in the U.S.? A Guide for Freelancers and 1099 Workers

What Is Self-Employment Tax in the U.S.? A Guide for Freelancers and 1099 Workers


What Is Self-Employment Tax in the U.S.? A Guide for Freelancers and 1099 Workers

If you're self-employed or earn income as an independent contractor, you’re not just responsible for income tax — you also owe self-employment (SE) tax.

Here's what it is, how it works, and how to stay on top of it.

πŸ’Ό What Is Self-Employment Tax?

Self-employment tax covers:

  • Social Security (12.4%)

  • Medicare (2.9%)

Total: 15.3% of your net earnings

Employees split this with their employer — but as a freelancer or 1099 worker, you pay the full amount yourself.

πŸ“„ Who Pays SE Tax?

You must file if:

  • You earned $400 or more in net self-employment income

  • You’re a sole proprietor, freelancer, independent contractor, or gig worker

  • You received income reported on Form 1099-NEC or 1099-K

πŸ’‘ How to Calculate It

  1. Calculate net earnings from self-employment (gross income – expenses)

  2. Multiply by 92.35% (the IRS-approved portion)

  3. Apply the 15.3% SE tax rate

πŸ” Use Schedule SE (Form 1040) to report and calculate

πŸ“† Do I Have to Pay Quarterly Taxes?

Yes — if you expect to owe $1,000 or more in taxes for the year.

You should make estimated payments four times a year:

  • April 15

  • June 15

  • September 15

  • January 15 (of the following year)

πŸ“‰ Can You Deduct Any of the SE Tax?

Yes!
You can deduct 50% of your SE tax when calculating your adjusted gross income (AGI) — this helps lower your income tax bill.

🧾 Tools to Stay Organized

  • Use bookkeeping software (e.g., QuickBooks, FreshBooks)

  • Track expenses and mileage

  • Keep all 1099 forms and invoices

πŸ“ Conclusion

Self-employment tax may feel like a burden — but it’s essential for contributing to Social Security and Medicare.

Understanding how it works can help you plan, budget, and avoid penalties.
If you're new to freelancing, consider working with a tax pro or using online tools to stay compliant.

 

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