Self-Employment Tax Calculator: How Much Do Freelancers Really Owe?

The self-employment tax is the biggest surprise for new freelancers. While employees only see half of Social Security and Medicare taxes (the employer pays the other half), freelancers pay both halves—a whopping 15.3% before income tax even enters the picture.

What Is Self-Employment Tax?

Self-employment (SE) tax covers Social Security and Medicare for people who work for themselves:

• Social Security: 12.4% on net earnings up to $168,600 (2024)
• Medicare: 2.9% on all net earnings (no cap)
• Additional Medicare: 0.9% on earnings over $200,000 (single) or $250,000 (married)

Total: 15.3% for most freelancers (before income tax).

Self-Employment Tax Calculator

Here's how to calculate your SE tax:

Example Calculation

Let's say you earned $100,000 in freelance income with $20,000 in business expenses:

• Net Income: $100,000 - $20,000 = $80,000
• Taxable SE Income: $80,000 × 0.9235 = $73,880
• SE Tax: $73,880 × 0.153 = $11,304

That's $11,304 in self-employment tax alone—before federal and state income taxes.

Total Tax Burden for Freelancers

Your actual tax rate includes:

1. Self-employment tax: ~15.3%
2. Federal income tax: 10-37% depending on bracket
3. State income tax: 0-13% depending on state

For a freelancer earning $80,000 net in California:

• SE Tax: ~$11,300
• Federal Income Tax: ~$8,500 (after deductions)
• State Income Tax: ~$3,500
• Total: ~$23,300 (29%)

Legal Ways to Reduce Self-Employment Tax

1. Maximize Business Deductions

Every dollar of legitimate business expense reduces your SE tax by 15.3 cents. Common overlooked deductions:

• Home office
• Health insurance premiums
• Retirement contributions
• Professional development

2. Contribute to Retirement Accounts

SEP-IRA: Contribute up to 25% of net self-employment income (max $69,000 in 2024). These contributions reduce both SE tax and income tax.

3. Consider S-Corp Election

For higher earners (~$80k+ net), electing S-Corp status can reduce SE tax. You pay yourself a "reasonable salary" (subject to SE tax) and take remaining profits as distributions (not subject to SE tax).

Note: S-Corp has additional costs and complexity. Consult a CPA.

4. Time Income and Expenses

If you're on the edge of a tax bracket, consider:

• Delaying invoices to push income to next year
• Prepaying deductible expenses in December
• Making large equipment purchases before year-end

The SE Tax Deduction

Here's some good news: you can deduct the employer-equivalent portion (half) of SE tax from your income. This reduces your adjusted gross income, lowering your income tax.

For the $80,000 earner with $11,304 in SE tax:

• Deduction: $11,304 ÷ 2 = $5,652
• This reduces taxable income by $5,652

Quarterly Estimated Payments

Don't forget: SE tax is part of your quarterly estimated tax payments. The IRS wants the money throughout the year, not just in April.

A safe rule: Set aside 25-30% of every payment for taxes, including SE tax.

Key Takeaways

• Self-employment tax is 15.3% (Social Security + Medicare)
• This is on top of federal and state income tax
• Maximize deductions to reduce the SE tax base
• Consider retirement accounts and S-Corp for higher earners
• Set aside 25-30% of income for total tax burden

Stop guessing what you owe. WealthSync calculates your estimated taxes in real-time, so you always know exactly how much to set aside.