Last updated ·Published ·By the WiserWork team
Self-Employment Tax: How Much to Set Aside
SE tax + income tax on your freelance profit — and the quarterly payment that covers it
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Self-employment tax is the shock in every freelancer's first spring: 15.3% off the top before income tax even starts — because you're now both employee and employer for Social Security and Medicare. This calculator runs the whole stack the way Schedule SE does: the 92.35% base, the Social Security cap, the deductible half, the 20% QBI deduction most independent workers qualify for, and finally income tax — ending with the only number you need on a sticky note: the quarterly payment.
The Stack, In Order
| Layer | Rate | On what |
|---|---|---|
| Social Security (both halves) | 12.4% | 92.35% of profit, up to the $184,500 wage base (W-2 wages use it up first) |
| Medicare (both halves) | 2.9% (+0.9% over $200k) | 92.35% of profit, uncapped |
| Income tax | Your brackets | Profit − half of SE tax − QBI deduction − standard deduction |
The two softeners built into the law: the 92.35% base (approximating what an employer's share would have removed) and the deductible half of SE tax — you pay both halves but deduct one from income tax. With the QBI deduction (20% of qualified profit), a $60,000-profit freelancer's effective federal rate lands near 20–23%, not the 35% panic-math suggests.
Quarterly Estimated Taxes: the System, Demystified
- Who: anyone expecting to owe $1,000+ beyond withholding.
- When: April 15, June 15, September 15, January 15 (note the uneven quarters — June's covers only two months).
- How: IRS Direct Pay online in two minutes; no forms needed if you pay electronically.
- How much: this calculator's quarterly figure — or the safe harbor (100%/110% of last year's total tax, split by four), which makes penalties impossible and is the right choice for rising-income years.
- The escape hatch: if you also have a W-2 job, raising withholding there covers 1099 income more elegantly than 1040-ES — withholding counts as paid evenly all year (the W-4 tool sizes it).
The Deductions That Shrink 'Profit' First
SE tax applies to net profit, so every legitimate business expense saves both layers (~30–40 cents per dollar): home office, mileage at the IRS rate, equipment, software, health-insurance premiums (a special above-the-line deduction for the self-employed), and — the heavyweight — solo retirement plans: a Solo 401(k) shelters up to $23,500 employee-side plus ~20% of profit employer-side; a SEP-IRA up to 20% of net SE income. High-profit freelancers routinely shelter $30–60k/yr.
When an S-Corp Starts Making Sense
Above roughly $80–100k of consistent profit, electing S-corp taxation lets you split income into salary (SE-taxed) and distributions (not) — saving ~15.3% on the distribution slice, minus payroll costs, a "reasonable salary" requirement, and extra filings. Below that threshold, the overhead eats the savings; above it, it's a conversation worth having with a CPA.
How to Use the Calculator
- Enter net profit (the Schedule C tool computes it from revenue and expenses), any W-2 wages, and filing status.
- Read the stack table — see exactly where each softener lands — and the quarterly figure.
- Open a separate savings account, auto-transfer the note's percentage from every client payment, and pay the quarters from there. That system is the whole game.
Frequently Asked Questions
Why do I pay 15.3% when employees pay 7.65%?
Employees' other 7.65% is paid invisibly by employers. Self-employed, you're both parties — but you deduct the employer half, and your rates fund the same Social Security credits toward retirement and disability benefits.
Do I owe SE tax on a small side gig?
Yes, from $400 of annual net profit — the lowest threshold in the tax code. Below your income-tax filing threshold you may owe SE tax even when you owe no income tax.
What if I have a W-2 job and freelance income?
Your W-2 wages consume the Social Security cap first — freelance profit above the combined $184,500 base pays only the 2.9% Medicare portion. The calculator's W-2 field applies this automatically; high-earners' side gigs are taxed lighter than they fear.
What happens if I skip quarterly payments?
An interest-based penalty (~8% annualized on the shortfall) — annoying, not catastrophic. The bigger danger is spending the tax money: the set-aside account habit matters more than perfect quarterly timing.
Can I deduct health insurance premiums?
Yes — self-employed health insurance is an above-the-line deduction against income tax (not SE tax) for you, spouse and dependents, as long as you're not eligible for employer coverage elsewhere.
LLC, sole proprietor, S-corp — does it change my taxes?
A single-member LLC is taxed identically to a sole proprietor — the LLC is liability protection, not tax strategy. The tax fork is the S-corp election, worth evaluating from ~$80-100k of steady profit.
Is my information private?
Yes — every figure computes locally in your browser.
The freelancers who thrive treat taxes as a subscription, not a surprise: a percentage auto-saved from every payment, four calendar reminders, and this calculator each January and June. The 15.3% never gets smaller, but it stops being scary the day it's pre-funded.