The Tax Nobody Warns You About
When most people think about taxes, they think about income tax. When you go freelance, you discover there's another tax on top of it: self-employment tax.
Self-employment tax is 15.3% of your net earnings. That's on top of your regular income tax. For a freelancer earning $80,000, self-employment tax alone is over $11,000 — before income tax adds another $10,000–$15,000.
If your first year of freelancing blindsided you with a giant tax bill, this is usually why.
What Self-Employment Tax Actually Is
Self-employment tax covers Social Security (12.4%) and Medicare (2.9%). Together, they add up to 15.3%.
When you're an employee, you pay half of this (7.65%) and your employer pays the other half (7.65%). It comes out of your paycheck, you never see it, and you don't think about it.
When you're a freelancer, you are both the employee and the employer. You pay both halves. All 15.3%.
This is one of the less-advertised costs of freelancing. The good news is that you get a deduction for half of it — more on that in a moment.
How Self-Employment Tax Is Calculated
The IRS doesn't apply SE tax to 100% of your net profit. They apply it to 92.35% of your net profit. This adjustment accounts for the fact that employees don't pay SE tax on the employer's share.
Here's the math on $80,000 of net freelance income:
$80,000 × 92.35% = $73,880 (SE tax base)
$73,880 × 15.3% = $11,304 (SE tax owed)
That $11,304 is your self-employment tax. It's separate from — and additional to — your income tax.
The Half-SE-Tax Deduction
Here's the first piece of good news. You can deduct half of your self-employment tax from your gross income before calculating income tax.
In the example above, half of $11,304 is $5,652. You deduct that from your $80,000 gross, leaving $74,348 of income subject to income tax.
This deduction is automatic — you don't need to itemize or qualify for it. It's specifically designed to put self-employed people on equal footing with employees (whose employer's share of FICA is paid pre-tax).
Additional Medicare Tax Above $200,000
If your net self-employment income exceeds $200,000 (or $250,000 for married filing jointly), you owe an additional 0.9% Medicare tax on the amount above that threshold.
For most freelancers, this won't apply. But if you're doing very well, it's worth knowing about: an income of $250,000 means you owe an extra 0.9% on $50,000, which is $450. Significant but not huge.
How SE Tax Stacks With Income Tax
Your total federal tax bill as a freelancer combines:
- Self-employment tax (on 92.35% of net profit)
- Federal income tax (on adjusted gross income, after deducting half of SE tax and other deductions)
Here's what that looks like at common income levels for a single filer with no dependents and only the standard deduction in 2026:
At $50,000 net profit:
- SE tax: ~$7,065
- Deduct half SE tax: ~$3,533
- Taxable income after standard deduction: ~$32,917
- Federal income tax: ~$4,050
- Total federal tax: ~$11,115 (22.2% effective rate)
At $75,000 net profit:
- SE tax: ~$10,597
- Deduct half SE tax: ~$5,299
- Taxable income after standard deduction: ~$55,151
- Federal income tax: ~$8,122
- Total federal tax: ~$18,719 (24.9% effective rate)
At $100,000 net profit:
- SE tax: ~$14,130
- Deduct half SE tax: ~$7,065
- Taxable income after standard deduction: ~$79,385
- Federal income tax: ~$13,564
- Total federal tax: ~$27,694 (27.7% effective rate)
At $150,000 net profit:
- SE tax: ~$21,194
- Deduct half SE tax: ~$10,597
- Taxable income after standard deduction: ~$125,853
- Federal income tax: ~$24,901
- Total federal tax: ~$46,095 (30.7% effective rate)
These are federal only. Add your state income tax on top.
What You Can Do to Reduce SE Tax
SE tax applies to your net profit — revenue minus legitimate business expenses. Every dollar of business expense reduces your SE tax base.
Deductible expenses include:
- Home office (dedicated space only)
- Health insurance premiums (fully deductible for self-employed)
- Retirement contributions to a SEP-IRA or Solo 401k (up to $69,000 in 2026 for a Solo 401k)
- Professional development and education
- Software, tools, and subscriptions
- Business-related travel and meals (meals at 50%)
- Equipment and technology
A freelancer who puts $15,000 into a Solo 401k doesn't just save for retirement — they reduce their taxable income by $15,000 and reduce their SE tax by roughly $2,300. That's a significant double benefit.
How Much to Set Aside
Looking at the table above, an effective federal rate of 22–31% is common across the $50k–$150k range. Add state income tax (0–13% depending on where you live) and the total picture becomes clear.
For most freelancers, saving 30% of gross income covers federal and state obligations. If you're in a high-tax state or a high income bracket, bump it to 35%.
Pocketed's tax calculator gives you a more precise number based on your actual income, state, filing status, and deductions. It's the fastest way to stop guessing and know exactly what you owe.
The Takeaway
Self-employment tax is a significant cost of freelancing — one that salaried employees rarely think about. But it's completely predictable once you understand it.
The formula never changes. The deductions are available to everyone. And with a 30% set-aside from every payment, you'll never be caught off-guard.
Know your number, set it aside automatically, and pay it on time. That's the entire system.