As a freelancer you pay both sides of FICA — 15.3% on top of income tax. See exactly how much that costs and how to legally reduce it.
Self-employment tax is 15.3% of net earnings — but the IRS applies it to 92.35% of your net income (because you can deduct the employer half of the tax). So the effective SE tax rate on your gross net earnings is about 14.13%. On top of that, you pay regular federal and state income tax.
The good news: you can deduct half of your SE tax above-the-line, reducing your AGI before income tax is calculated. And contributions to a SEP-IRA (up to 25% of net earnings, max $69,000 in 2026) or Solo 401(k) come off your AGI too — the biggest tax lever available to self-employed people.
Most freelancers should set aside 25–30% of every payment for taxes. This calculator tells you your personal number based on your actual income and deductions.
The IRS multiplies your net self-employment income by 92.35% before applying the 15.3% SE tax rate. This accounts for the fact that W-2 employees pay FICA on their gross wages, but their employer absorbs half the cost. The 92.35% factor roughly equalizes the treatment — you're effectively deducting the employer's 7.65% share before calculating the tax.
A SEP-IRA lets you contribute up to 25% of net self-employment income (after the SE tax deduction), with a max of $69,000 in 2026. It's simple to set up and contributions can be made up to your tax filing deadline. A Solo 401(k) has higher potential contributions for higher earners because it allows both employee and employer contributions — but requires more administration.
Self-employed individuals with net earnings above $200,000 (single) or $250,000 (married jointly) pay an additional 0.9% Medicare surtax on earnings above those thresholds. This applies on top of the standard 15.3% SE tax and is not included in the employer match — it's entirely the employee/self-employed person's burden. High-earning freelancers should factor this in.
The IRS allows deductions for ordinary and necessary business expenses: home office (actual expense or $5/sq ft up to 300 sq ft), vehicle (standard mileage is $0.70/mile in 2026 or actual expenses), equipment, software, professional development, professional services, and health insurance premiums. These deductions reduce your net earnings before SE tax is even calculated — making them doubly valuable.