How Self-Employment Tax Works

SE tax is the employee + employer share of FICA: 12.4% Social Security (on the first $168,600 in 2024) plus 2.9% Medicare, applied to 92.35% of net earnings (the IRS excludes the "employer" half from the base). Half the tax is deductible on your 1040 as an above-the-line adjustment.

Worked Example

On $75,000 of net freelance income, the taxable base is $69,263; Social Security is $8,589 and Medicare is $2,009, for a total of $10,597 (14.1% effective). The $5,299 AGI deduction reduces your income tax, and quarterly payments run about $2,649 each.

Budgeting for It

Freelancers often forget SE tax when quoting rates — a 15.3% FICA load on top of income tax means a $75,000 freelance income pays about $10,600 in SE tax alone. Setting aside roughly 25–30% of every invoice for taxes avoids April surprises, and the safe-harbor quarterly payments keep penalties away.