As a freelancer or self-employed individual, you're responsible for managing your own taxes, which can be complex and overwhelming. Unlike W-2 employees who have taxes withheld, you must estimate and pay taxes yourself, including self-employment tax.
Understanding Self-Employment Tax
Self-employment tax is 15.3% of your net earnings (up to $160,200 in 2024). This covers:
- 12.4% for Social Security
- 2.9% for Medicare
As a self-employed person, you pay both the employee and employer portions of these taxes. W-2 employees only pay the employee portion (7.65%), which is split with their employer.
When to Pay Quarterly Taxes
You must pay estimated quarterly taxes if you expect to owe $1,000 or more for the year. Quarterly payment deadlines are:
- Q1: April 15 (for Jan-Mar income)
- Q2: June 15 (for Apr-May income)
- Q3: September 15 (for Jun-Aug income)
- Q4: January 15 (for Sep-Dec income)
How to Calculate Quarterly Taxes
Method 1: Annualized Income
Estimate your annual income, calculate total tax (income tax + self-employment tax), then divide by 4 for each quarterly payment.
Method 2: Actual Income
Calculate tax based on actual income for each quarter. This is more accurate if your income varies throughout the year.
Common Deductions for Freelancers
Maximize your deductions to reduce taxable income:
- Home Office: Deduct portion of home used exclusively for business
- Vehicle Expenses: Business mileage or actual vehicle expenses
- Equipment & Software: Computers, software, tools needed for work
- Professional Development: Courses, conferences, certifications
- Meals & Travel: Business meals (50% deductible) and travel expenses
- Internet & Phone: Business portion of these expenses
Tips for Managing Freelance Taxes
- Set aside 25-30%: Save this percentage of every payment for taxes
- Track expenses: Keep detailed records of all business expenses
- Use separate accounts: Keep business and personal finances separate
- Work with a tax professional: Especially in your first year of freelancing
- Pay on time: Avoid penalties by making quarterly payments on schedule
Calculate Your Freelance Taxes
Use our free Freelance Income Calculator to estimate your taxes, calculate quarterly payments, and see your after-tax income.