Tax Income

Self-employment taxes consist of Social Security and Medicare taxes that freelancers, gig workers, and independent contractors are required to pay since they are considered both the employer and employee.

Individuals earning $400 or more in net income from self-employment must pay self-employment taxes. For church employees, the threshold is $108.28.

As of 2023, the self-employment tax rate is 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. An additional 0.9% Medicare tax applies to income above specific thresholds.

Calculate your net earnings from self-employment, multiply the amount by 92.35% to adjust for allowable deductions, then apply the 15.3% tax rate to determine the amount owed.

Freelancers and gig workers must make quarterly estimated tax payments if they expect to owe $1,000 or more in taxes for the year. Deadlines are typically April 15, June 15, September 15, and January 15 of the following year.

Reduce your taxable income by deducting eligible business expenses, such as office supplies, software, travel, advertising, and home office costs. Keep detailed records and receipts to substantiate your claims.

You can deduct the employer-equivalent portion of your self-employment tax (50%) when calculating your income taxes, which helps reduce your overall tax liability.

Use Schedule SE (Form 1040) to report self-employment taxes. You may also need to file Schedule C to report business income and expenses.

Consider using accounting tools like QuickBooks, FreshBooks, or Wave to track income, expenses, and calculate estimated taxes. Many tools also integrate with tax filing platforms.

If you're unsure about tax laws or need assistance, consult a tax professional or CPA who specializes in self-employment taxes to ensure compliance and maximize deductions.