The self-employment tax most freelancers don't see coming

When you work for a company, your employer pays half your Social Security and Medicare taxes. You pay the other half through payroll withholding and never really notice it.

When you work for yourself, you pay both halves. That's the self-employment tax — 15.3% on top of your regular income tax. Most people find this out in April.

How it actually works

The 15.3% breaks down as 12.4% Social Security and 2.9% Medicare. It applies to 92.35% of your net profit, not the full amount — that's because the IRS lets you deduct the "employer half" before calculating the base.

So if you net $80,000 as a freelancer:

SE tax base$80,000 × 92.35% = $73,880SE tax owed$73,880 × 15.3% = $11,304

That $11,304 comes before a single dollar of income tax.

The deduction people miss

You can deduct half of your SE tax from your gross income before calculating income tax. On $80,000 net that's roughly $5,652 off your adjusted gross income — worth knowing, though it doesn't change the core problem.

Quarterly payments

The IRS expects you to pay as you go. If you expect to owe more than $1,000 in tax for the year, you should be making quarterly estimated payments — due in April, June, September, and January. Missing these triggers underpayment penalties even if you pay everything owed by April 15.

What this means for your rate

A freelancer targeting $80,000 take-home in a state with average income tax needs to gross roughly $115,000–$120,000 to get there — depending on expenses, health insurance, and how many weeks they actually bill.

Most rate calculators ignore this entirely. ChargeWhat works backwards from your target take-home, applies SE tax correctly, and accounts for your state's income tax, expenses, and billable hours. Free, no signup.