Self-Employment Tax Calculator Tax Estimator

You’re an independent contractor or freelancer working for someone, but not as an employee. Only your net business income is actually subject to self-employment tax.

To maintain EA status, they must stay up to date in the field by completing 72 hours of continuing education every three years. TaxAct E-File Concierge™ self employment tax service provides phone calls and related support regarding federal e-file status changes using the phone number provided in My Account.

Self-Employment Tax: Who Needs to Pay

If you rent office space for your business, you can deduct your rent payments from your business income. You can also deduct any rent payments you make for tools or other equipment for your business. To file your taxes, you’ll need a Social Security number of an individual taxpayer identification number, better known as your ITIN. It’s possible to earn both self-employment income and income from a full-time job in the same year. Many people today work both full-time for an employer and run a side hustle. For instance, taxpayers might work in an office 5 days a week but also drive for a ride-sharing app on evenings and weekends.

Tax Rate Schedule is first determined by your filing status and your income. Your federal income tax bracket will determine how much you should be paying as a general foundation. If you own your business, you have access to tax breaks and write-offs. When leveraged correctly, those additional tax benefits can make up for the higher self-employment tax and lead to a lower total effective tax rate. Self-employment tax is equivalent to the payroll taxes paid by employers and employees, and the standard rate is 15.3%. Technically, self-employed people pay slightly more in Social Security and Medicare taxes than traditional W-2 workers. This is because they have to pay the employer portion of the tax in addition to their own.

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You can estimate these payments by using tax form 1040-ES and make them online through the IRS’s EFTPS following the IRS’s estimated tax payment schedule. For 2021, you must pay the social security tax on your first $142,800 of business income generated.

You may also want to seek guidance from a tax professional. That way, you can reduce the risk of incurring penalties or owing more than you budgeted for when you file your annual return. To calculate their quarterly taxes, independent contractors must estimate their adjusted gross income, taxable income, taxes, deductions and credits.

Credits & Deductions

Let’s say you have $150,000 of net earnings from self-employment in 2022. However, you do not have to pay any Social Security tax on the remaining $3,000. The total self-employment tax is 15.3% of your net earnings and consists of two parts. The law sets a maximum amount of net earnings that are subject to the Social Security tax. The maximum amount may change annually and has steadily increased over time, reaching $147,000 for the 2022 tax year ($160,200 for 2023).

Manage your spend more effectively with our seamless platform. Digital platform for business banking is so helpful, as it will maintain these records for you. You’ll always have quick access to your financial information so that you can stay on top of your self-employment earnings. If you’re unsure whether an expense is tax-deductible, run it by a tax professional. If your net earnings fall below the Social Security wage base of $142,800, you can calculate your self-employment tax quite easily. But if you’ve had a particularly good year, your self-employment taxes are slightly more complex. Refer to our section below with instructions for high earners under step 4, and we’ll explain how to calculate the tax on this income.

Should I file estimated taxes?

Bench assumes no liability for actions taken in reliance upon the information contained herein. We’ve rounded the result because the IRS gives you the option of rounding off cents to whole dollars on your tax return and schedules.