Understanding Freelance Taxes in the USA
Freelancers and independent contractors are responsible for paying both the employee and employer portions of Social Security and Medicare taxes — collectively called the Self-Employment (SE) Tax. This currently totals 15.3% (12.4% Social Security + 2.9% Medicare) on net self-employment income.
The Self-Employment Tax Deduction
You can deduct 50% of your self-employment tax from your gross income before calculating income tax. This partially offsets the burden compared to traditional employees.
Quarterly Estimated Tax Payments
Freelancers must pay taxes quarterly (April 15, June 15, September 15, January 15) or face IRS underpayment penalties. Each quarterly payment should be approximately 25% of your estimated annual tax liability.
Key Business Deductions to Track
- Home office (dedicated workspace)
- Equipment and software
- Health insurance premiums
- Business travel and mileage
- Professional development and subscriptions
- Retirement contributions (SEP-IRA, Solo 401k)