Frequently asked questions
What is self-employment (SE) tax?
When you're employed, your employer pays half of Social Security (6.2%) and Medicare (1.45%) taxes. As a freelancer, you pay both halves yourself — that's 15.3% on your net self-employment income up to the Social Security wage base ($168,600 in 2024). The good news: you can deduct half of this SE tax from your income before calculating income tax.
When are quarterly payments due?
Q1 (Jan–Mar): April 15 · Q2 (Apr–May): June 17 · Q3 (Jun–Aug): September 16 · Q4 (Sep–Dec): January 15 of the following year. Missing these dates triggers an underpayment penalty — typically 5–8% annualized on the shortfall, which is avoidable with proper planning.
What counts as a business expense?
Any ordinary and necessary expense for your business: home office (dedicated space), equipment, software subscriptions, professional development, business travel, client meals (50%), health insurance premiums (100% deductible for self-employed), phone and internet (business-use portion), and professional services like accounting.
Do I owe taxes if freelance income is under a certain amount?
If your net self-employment income exceeds $400 in a year, you must file a tax return and pay SE tax. Federal income tax depends on your total income minus deductions. Even small freelance earnings trigger the SE tax requirement, which catches many first-time freelancers off guard.
Should I form an S-Corp or LLC?
At around $50k–$70k+ in net freelance income, an S-Corp election can reduce self-employment taxes by paying yourself a "reasonable salary" and taking the rest as distributions not subject to SE tax. The savings can be $5,000–$15,000/year at higher incomes, but there are administrative costs. Talk to a CPA before making this decision.