Working for yourself means no employer withholding. You are responsible for calculating and paying your own taxes.
Self-employment tax
You pay 15.3% on 92.35% of net earnings: 12.4% for Social Security up to the annual wage base and 2.9% for Medicare. You can deduct half of it from your income. Together with income tax, expect to set aside 25%–35% of profit, depending on your bracket.
Deductions
Deduct ordinary and necessary business expenses on Schedule C, such as software, supplies, marketing, a portion of internet and phone and a qualifying home office. The qualified business income deduction can reduce taxable income by up to 20%. Self-employed health insurance premiums and retirement plan contributions, like a SEP-IRA or solo 401(k), can also be deducted.
Staying organized
Separate business and personal accounts, track income and expenses monthly and make quarterly estimated payments to avoid underpayment penalties. Consider working with a CPA once income grows or your situation becomes complex.
Try the numbers
Use our Self-Employment Tax Calculator to see this in practice. With its default example (Net self-employment profit: $90,000; Filing status: Single; Other income (W-2, etc.): $0.00), it shows total federal tax: $18,608. Adjust the inputs to match your situation.
Key takeaways
- Set aside a share of every payment for taxes.
- Deductions and the QBI deduction can reduce taxable profit.
- Keep clean books and pay quarterly.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.