Self-Employment Tax Calculator Estimate Your Taxes

Hypothetical illustrations may provide historical or current performance information. Absolutely, because the SSA projections sometimes undershoot the actual final numbers. For instance, the 2025 ceiling was projected to be $174,900 just last May, but the final number turned out to be $176,100.

Determining Net Earnings

Bankrate.com is an independent, advertising-supported publisher and comparison service. Our websites may earn compensation when a customer clicks on a link, when an application is approved, or when an account is opened. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. Self-employed individuals in Kentucky must pay state income tax on their earnings. This tax is calculated at a flat rate of 5% on the income you take from your business.

Estimating Quarterly Payments

• High earners should regularly review their financial situation to ensure they are taking advantage of all possible tax benefits.
• If you (1) are self-employed as a sole proprietorship, an independent contractor or freelancer and (2) earn $400 or more, you may need to pay SE tax.
• In most situations, self-employed individuals must pay estimated quarterly taxes.
• By understanding these special considerations, high earners can better manage their self-employment taxes and potentially save money.
• To learn more about this process, check out our 411 article on how to file quarterly taxes.
• The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation.
• Keeping track of all expenses and deductions is crucial for maximizing tax savings.

The self-employment tax applies to people who are small-business owners, independent contractors, freelancers, gig workers or otherwise in business for themselves. If you receive a 1099 form, including for goods or services you sell through Venmo, Paypal, eBay and other apps, those earnings may be subject to self-employment tax. It’s the sum of a 12.4 percent tax for Social Security and a 2.9 percent tax for Medicare. While employers deduct these payroll taxes on behalf of their workers, people who are self-employed must file the self-employment tax directly with the IRS. So, you’ve started a business or decided to freelance, and freed yourself from the daily grind of that old job. In fact, you’ll owe tax that you never had to pay as an employee if you made $400 or more in self-employment net income.

• “Business expenses play a massive role in reducing self-employment taxes,” reminds Brummond.
• Some self-employed individuals may be eligible to deduct the cost of health benefits from their gross income.
• You can deduct half of your self-employment tax on your income taxes.
• If you don’t pay your taxes, you may face penalties and interest charges.
• Although the self-employment tax rate remains stable, understanding your financial obligations is vital for avoiding surprises.
• Or, if you want a completely hands off experience, we can even file for you.
• Keep in mind, the Internal Revenue Service (IRS) dictates the maximum amount you can contribute in a given year.

IRS Resources

Form 1040-ES, Estimated Tax for Individuals PDF, is used to figure these taxes. Form 1040-ES contains a worksheet that is similar to Form 1040 or 1040-SR. You will need your prior year’s annual income tax return in order to fill out Form 1040-ES. At first glance, the self-employment tax rate might seem like a bad deal for entrepreneurs, but there is a silver lining. The IRS allows the self-employed to deduct the employer portion of the tax, e.g., 7.65%, from their gross income.

Should I file estimated taxes?

It’s important to keep records of all health-related expenses to ensure proper deductions. Freelancers and independent contractors often work petty cash on a project basis. These individuals need to track their income and expenses carefully to ensure they pay the correct amount of self-employment tax.

Managing self-employment tax can be tricky, but there are many resources and tools available to help. It’s important to keep track of these dates to avoid Payroll Taxes any surprises. If any of these dates falls on a weekend or federal holiday, the due date is moved to the next business day. Fill in the fields below to estimate your potential self-employment tax.

• However, if you expect to owe a lot, you might need to make estimated payments quarterly.
• If you’re self-employed, you’ll likely be on the hook to pay self-employment taxes for Social Security and Medicare, in addition to income taxes.
• While some audits are random, others can be avoided by being aware of the most common red flags.
• In 1935, the federal government passed the Federal Insurance Contribution Act (FICA), which established taxes to help fund Social Security and Medicare.
• Understanding these deductions can lead to significant savings, so it’s worth the effort to learn and apply them effectively.
• She has a degree in finance, as well as a master’s degree in journalism and an MBA.
• Additionally, look into retirement plans tailored for self-employed people, such as the SOLO 401(k) or Simplified Employee Pension (SEP) plan.