Self-Employment Tax: What Is It, How to Calculate It, and When to Pay

Setting your hours and making your own business decisions is a liberating aspect of being your own boss. You're no longer a tiny cog in the wheel!But that level of freedom comes with increased pressure and demands, including responsibilities related to your business taxes. Now that you're self-employed, you'll have to pay your taxes directly to the Internal Revenue Service (IRS) and make quarterly tax payments four times annually.Read on to understand self-employment taxes, how to calculate them, and when to pay them.

Key Takeaways

Key takeaways self-employed business owners should get from this tax guide include: 

• What the self-employment tax rate is for 2024 and 2025. 

• When you should pay your business taxes.

• Who needs to pay these taxes. 

• Other taxes self-employed individuals are responsible for. 

What Is Self-Employment Tax?

Employers, self-employed individuals, small business owners, LLCs, sole proprietors, and W-2 employees help fund critical Medicare and Social Security programs.Employers typically contribute to Medicare and Social Security through FICA on their employees’s behalf. Employee wages are withheld to pay half of this. The employer portion pays the other half.Self-employed individuals are responsible for contributing both portions to Medicare and Social Security.

Self-Employment Tax Rate for 2024 and 2025

The IRS set the self-employment tax rate at 15.3%, which remains unchanged for 2025. That rate is the sum of two parts: A 12.4% Social Security tax rate and a 2.9% Medicare tax rate. 

Your self-employment income is subject to the Medicare tax, but higher incomes are not subject to the Social Security portion beyond a set point. In 2024, only your first $168,600 in self-employment earnings were taxed at the Social Security rate. For the 2025 tax year, the Social Security tax threshold applies to your first $176,100 in self-employment earnings.

Who Has to Pay Self-Employment Tax?

You will be liable for Social Security and Medicare taxes if you've earned $400 or more from self-employment work.If you work multiple jobs and have at least one employer withholding income for FICA tax payments, you may not need to pay additional taxes, which will depend on the relative income and the amount paid by your employer.

How to Calculate Self-Employment Tax

Your self-employment tax total is calculated according to your net income, including wages and tips. Assuming your income doesn't exceed annual thresholds, you will pay 15.3% of your net earnings in self-employment tax.

How to File Self-Employment Taxes

You can pay self-employment taxes online through IRS Direct Pay. Calculate and report your self-employment taxes with tax form 1040, Schedule SE.You must use your Social Security Number or an Individual Taxpayer Identification Number to make payments online. Using IRS Direct Pay is free and secure and doesn't require you to sign in to the platform to make a payment. 

Paying with a Social Security Number

If you’re eligible for a Social Security Number and card but don’t have one, you can apply for a number and card with the Social Security Office online. The government will use this number to identify you and your records for tax purposes. 

Paying with an Individual Taxpayer Identification Number

For individuals who need to pay taxes but are ineligible for a Social Security Number, you can register for an Individual Taxpayer Identification Number with IRS Form W-7. 

Which Forms Do You Need to File SE Taxes?

Use the following forms to prepare and file your self-employment income with the IRS. Your IRS Form 1040 detailing the 2024 tax year is due by April 15, 2025. 

IRS Form 1040

You will file IRS Form 1040, U.S. Individual Income Tax Return. This form reports your taxable income, deductions from all sources, retirement or investment account returns, and self-employment income.Prepare your Form 1040 to calculate your federal taxable income. To determine your federal tax liability, use the tax tables in the Form 1040 instructions or refer to the IRS tax brackets for 2024.

IRS Form 1040, Schedule C

Use Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), to report your small business activities. Schedule C reflects your self-employment income and associated expenses. The schedule calculates your net income from self-employment.You may need to attach multiple Schedule Cs if you worked different unrelated contractor positions throughout the year.

IRS Form 1040, Schedule SE

Use Schedule SE (Form 1040), Self-Employment Tax, to determine your self-employment tax liability. Schedule SE uses your income from Schedule C to calculate the self-employment tax liability. Typically, you can deduct half of your self-employment tax liability on your federal income tax returns.

Paying Self-Employment Tax with Estimated Taxes

In addition to filing IRS Form 1040 by the April 15 deadline, you must also calculate and submit quarterly estimated taxes four times per year.  

IRS Form 1040-ES

The IRS requires self-employed people to remit income tax throughout the year, not just at tax time, like W-2 employees. To avoid penalties, freelancers must submit quarterly estimated tax payments.

Use Form 1040-ES, Estimated Tax for Individuals, to estimate your income for the entire year and determine your quarterly tax liability. The form instructions include an estimated tax worksheet for self-employed business owners.Submit your 2025 quarterly estimated tax payments by the following dates.

• First quarter (January 1st – March 31st, 2025): April 15th, 2025

• Second quarter (April 1st – May 31st, 2025): June 16th, 2025

• Third quarter (June 1st – August 31st, 2025): September 15th, 2025

• Fourth quarter (September 1st – December 31st, 2025): January 15th, 2026

Tax Deductions for the Self-Employed

Unlike W-2 employees, you can take advantage of numerous tax deductions for self-employed individuals. Similar to a tax credit, a tax deduction reduces your business's tax liability by lowering your total taxable business income.

Use this list for insights on potential tax deductions you can take to reduce your tax liability.  

Self-Employment Tax Deductions

While being self-employed subjects you to extra taxes, you can claim some tax payments as deductible business expenses. You can deduct the portion of your self-employment taxes that an employer typically pays from your adjusted gross income (AGI).

Home Office Deduction

Many people work from home, but not everyone can claim a deduction for their home office. You can claim and deduct expenses related to your home office if it is your principal place of business. You must use a specific area of your home exclusively and regularly for work purposes.If you meet those requirements, you can count a proportional amount of your home costs, including utilities, internet, and rent or mortgage payments, as business expenses.

Health Insurance Premiums

As long as your spouse’s insurance plan cannot cover you, you can deduct your health insurance or HMO premiums from your taxable income using the self-employment health insurance tax deduction.

Internet and Phone

Depending on your line of work, internet and phone use may be essential for conducting business. You can deduct a portion of the costs for those services according to your proportional business usage.

Meals or Travel

Travel taken exclusively for business purposes can be deducted. You can claim all your lodging and travel costs as business expenses. 

Vehicle

If you use your vehicle for a business purpose other than driving to and from a workplace, you can deduct related costs according to its use. With careful records, you can keep track of all your vehicle costs and deduct the qualifying portion.A simplified option for deducting vehicle costs is to add up the miles you drive for business and deduct them according to the IRS’s standard mileage rates.  The standard mileage rate for 2025 is 70 cents per mile.

Interest

While the principal on many loans can’t be deducted, you can deduct the interest on loans, including your home mortgage, even if you don’t have a home office.

Education

The IRS views continuing education as a regular and necessary part of many professions. Any money you spend to help you do your job better or keep up with industry developments is money you can deduct for education expenses.This also covers any fees for professional publications or association memberships associated with your self-employment work.

Insurance

Like deductions related to health insurance premiums, you can deduct other qualifying insurance. Do you have a separate insurance policy covering a workplace or work-related need? If so, you can claim those premiums as tax deductions. 

Workplace Office

If you have an office separate from your home (not a home office), you can deduct the rent and utilities for that office as work expenses. You can also remove any other costs related to maintaining your workplace.Whether you have a separate office or not, you can deduct costs for office supplies, software, or technology used exclusively for your business and most costs related to staff you employ. 

Startup Costs

You can claim deductions related to your startup costs if you just started your self-employed business. This includes many one-time expenses in setting up your workplace and establishing your work infrastructure.

Self-Employment Taxes Made Easy with 1-800Accountant

There are many opportunities to minimize your self-employment tax burden, and we hope you take advantage of all that apply. Unfortunately, few self-employed individuals have the time or expertise to fully claim the savings they deserve. That's why many independent contractors, freelancers, and self-employed individuals trust the tax professionals at 1-800Accountant, America’s leading virtual accounting firm, for their self-employment tax calculations.

Whether you need business tax preparation, tax advisory, or any of our professional accounting services, we have the affordable solutions you need to ensure your business remains compliant with a minimal tax liability. Schedule a quick consultation–usually 30 minutes or less—to learn how we can help.