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.

---

💼 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.

---

📄 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

---

💡 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

🔍 Use Schedule SE (Form 1040) to report and calculate

---

📆 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)

---

📉 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

---

📝 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.

---