Question 1

What is self-employment tax and who pays it?

Accepted Answer

Self-employment (SE) tax is a 15.3% tax on your net self-employment earnings, covering Social Security (12.4%) and Medicare (2.9%). Anyone earning $400 or more from self-employment must pay SE tax. Unlike W2 employees who split this with an employer, freelancers pay the full 15.3% themselves.

Question 2

How do I calculate my self-employment tax?

Accepted Answer

Multiply your net self-employment earnings by 92.35% (to account for the fact that the employer portion of FICA is based on gross income), then multiply by 15.3%. You can deduct 50% of SE tax from your income for income tax purposes. ToolCrate's SE Tax Calculator does this automatically.

Question 3

What are quarterly estimated taxes and when are they due?

Accepted Answer

Quarterly estimated taxes are payments made to the IRS four times a year for freelancers and self-employed individuals. For 2026 the deadlines are: April 15, June 15, September 15, and January 15 (2027). Most states with income tax also require quarterly estimated payments.

Question 4

What happens if I don't pay quarterly estimated taxes?

Accepted Answer

If you owe more than $1,000 at tax filing time and didn't pay enough during the year, the IRS charges a penalty on the underpayment. Using the safe harbor rule (paying 100% of last year's tax or 110% if high-income) helps you avoid penalties even if your income varies.

Question 5

What income is subject to the Additional Medicare Tax?

Accepted Answer

Additional Medicare Tax is a 0.9% tax on earnings above $200,000 (single filers) or $250,000 (married filing jointly). Unlike regular Medicare tax, there is no employer match on the additional portion, so self-employed individuals pay the full 0.9% on income over the threshold.

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