Self Employment Tax Calculator

What does self-employment mean, and how is self-employment tax calculated?  

With more than 40 million self-employed workers in the U.S., it’s important to first understand who qualifies as being self-employed. You are self-employed if you don’t have someone telling you when to work, and you’re paid for the job, rather than for your time. Even if you’re part-time self-employed, you can still take advantage of tax benefits as if you were full-time self-employed. Self-employment income can come from many sources, but some of the most common are from gig work such as ridesharing, selling goods online, reselling goods online, contract work, freelancing, and small-business owners. 

The IRS requires self-employed taxpayers to pay income tax on all of their net profit, and self-employment tax on net earnings of $400 or more. Self-employment tax is applied to 92.35% of your net earnings from self-employment. You calculate net earnings by subtracting your business expenses from the gross income of your gig or other self-employment income. You must pay Social Security tax on most earnings and Medicare tax on all earnings. Self-employed workers are taxed at 15.3% of their net profit. This percentage is a combination of Social Security (12.4%) and Medicare (2.9%) taxes, also known as FICA taxes.

Even older adults who collect Social Security benefits, but earn income from self-employment, are required to file a tax return and pay self-employment tax every year. 

When do I make tax payments to the IRS when I’m self-employed? 

Self-employed taxpayers typically make quarterly estimated payments, if they expect to owe taxes when their annual tax return is filed in April. To figure your estimated tax, you must estimate your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. 

You should pay estimated tax four times a year. When you don’t pay enough by the quarterly deadline, you may be charged a penalty, even if you anticipate getting a refund.  

When to pay your quarterly estimated taxes 

Note: If these due dates fall on a Saturday, Sunday, or legal holiday, the payments are due the next business day. 

What does it mean to have 1099 income? 

A 1099 tax form is a record for earnings. Reported payments of at least $600 to a person, who is not a W-2 employee for services or goods, will result in them receiving a Form 1099-NEC.  

Any taxpayer can receive a Form 1099, and there are many types of Forms 1099. The most common type of Form 1099 you could get is the 1099-NEC for self-employment or gig income, and 1099-K for third-party payment platforms. Or, to put it simply, income from customers who pay by credit or debit card, or by a third-party such as PayPal, Apple Pay or Google Pay.   

Form 1099 types 

• Form 1099-A, Acquisition or Abandonment of Secured Property 
• Form 1099-B, Proceeds from Broker and Barter Exchange Transactions 
• Form 1099-C, Cancellation of Debt 
• Form 1099-CAP, Changes in Corporate Control and Capital Structure 
• Form 1099-DIV, Dividends and Distributions 
• Form 1099-G, Certain Government Payments 
• Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments 
• Form 1099-INT, Interest Income 
• Form 1099-K, Payment Card and Third-Party Network Transactions 
• Form 1099-LS, Reportable Life Insurance Sale 
• Form 1099-LTC, Long-Term Care and Accelerated Death Benefits 
• Form 1099-MISC, Miscellaneous Income 
• Form 1099-NEC, Nonemployee Compensation 
• Form 1099-OID, Original Issue Discount 
• Form 1099-PATR, Taxable Distributions Received from Cooperatives 
• Form 1099-Q, Payments from Qualified Education Programs (Under Section 529 and 530) 
• Form 1099-QA, Distributions from ABLE Accounts 
• Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 
• Form 1099-S, Proceeds from Real Estate Transactions 
• Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA 
• Form 1099-SB, Seller's Investment in Life Insurance Contract 

Deductions for self-employed taxpayers, businesses, contractors, and freelancers, and how to lower self-employment tax 

You can take many types of deductions if you’re self-employed. You should have ongoing conversations throughout the year with your Tax Pro to understand what records you need to keep in order to deduct costs from your income taxes. You don’t want to miss out!  For example:  

• The Qualified Business Income deduction, or QBI. This is one of the biggest deductions. It allows you to deduct up to 20% of your qualified business income, before income taxes are determined. 
• Half of the Self-Employment tax. This one allows you to claim an adjustment to income for 50% of the self-employment tax.  
• Home office deduction. Be sure you understand that there are rules on the space. The office space must be an area separated from the living part of the home, and only used for business purposes. It cannot be a room in your home that’s also a guest bedroom, or a part of your kitchen.  
• Business-related vehicle mileage. You can take the standard mileage deduction, which is 65.5 cents per mile. Or, you can deduct the expenses paid to operate and maintain your vehicle during the year, which include gas, oil, repairs, general maintenance, registration, and monthly payments. In both cases, you must keep track of total mileage for the year and business mileage for the year. 
• Health insurance premiums deduction. If you don’t have health insurance available through an employer (or your spouse’s employer), you can deduct all of your and your family’s health and dental premiums as an adjustment to income. This means without itemizing deductions.  
• Meals. You can deduct meals if you’re traveling for business, or if you’re entertaining someone for your business. You can’t deduct all entertainment expenses, but you can deduct a portion of the cost of meals. You can either deduct 50% of the meal’s actual cost when you kept your receipts, or 50% of the standard meal allowance when you kept records of the time, place, and business purpose of your travel, but not your actual meal receipts.  
• Marketing and advertising expenses. The costs you incur for marketing your self-employed business to the world can be deducted, including social and digital ads, as well as direct-mail pieces and traditional print media, such as flyers, pamphlets, mailing signs, and even business cards. 
• Business supplies and materials. Items you use during the year for your business, like paper, electronics, professional instruments, books, equipment, and more, qualify in this category.  

And you may be able to deduct much more. Just be sure to keep good records of these items in order for them to be accurately and correctly deducted. Not sure? Bring all your receipts with you when you meet with your Tax Pro, to determine what you might be able to deduct on your tax return.  

Use this calculator to estimate your self-employment taxes. Normally, these taxes are withheld by your employer. However, if you are self-employed, operate a farm, or are a church employee, you may owe self-employment taxes. Please note that the self-employment tax rate is 12.4% for the Social Security portion and 2.9% for Medicare. 

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.