How Freelancer Taxes Work in the US
As a freelancer or independent contractor, you're responsible for paying both the employee and employer portions of Social Security and Medicare taxes — totaling 15.3% of net self-employment income. This is called the Self-Employment (SE) Tax, and it's on top of your regular income tax.
The Two Taxes You Pay as a Freelancer
- Self-Employment Tax (15.3%): 12.4% Social Security + 2.9% Medicare, applied to 92.35% of net earnings. You can deduct half of this from your income tax.
- Federal Income Tax: Applied to your AGI after deductions. Ranges from 10% to 37% based on income and filing status.
Quarterly Estimated Tax Payments
If you expect to owe more than $1,000 in taxes, the IRS requires you to pay estimated taxes quarterly. Missing these payments results in an underpayment penalty. The due dates for 2025 are April 15, June 16, September 15, and January 15, 2026.
Deductions That Reduce Your Tax Bill
- Home office deduction: $5/sq ft up to 300 sq ft, or actual expense method
- Health insurance premiums: 100% deductible if not eligible for employer plan
- SEP-IRA contributions: Up to 25% of net self-employment income or $69,000 (2024)
- Business equipment: Laptops, cameras, software — fully deductible via Section 179
- Half of SE tax: Always deductible from your gross income
Frequently Asked Questions
What is the self-employment tax rate for 2026?
The self-employment tax rate is 15.3% — 12.4% for Social Security (on income up to $168,600) plus 2.9% for Medicare (no income cap). An additional 0.9% Medicare surtax applies to self-employment income above $200,000 (single) or $250,000 (married). This is applied to 92.35% of your net self-employment earnings.
Do I need to pay taxes quarterly if I'm a freelancer?
Yes, if you expect to owe $1,000 or more in taxes for the year, the IRS requires quarterly estimated payments. Failure to pay can result in an underpayment penalty. Use Form 1040-ES to calculate and submit payments. The safest strategy is to set aside 25–30% of every payment you receive.
Should I form an LLC or S-Corp as a freelancer?
An S-Corp election can reduce self-employment tax once your net profit exceeds approximately $40,000–$50,000/year. By paying yourself a reasonable salary and taking the rest as distributions, you only pay SE tax on the salary portion. The savings can be significant — often $3,000–$10,000/year — but come with added complexity and costs. Consult a CPA to evaluate your specific situation.