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Paying Self-Employment Tax: What You Need To Know In 2024

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Paying Self-Employment Tax: What You Need To Know In 2024

Every freelancer, independent contractor and small business owner has to deal with self-employed tax at some point. Unlike W-2 workers who have their employer deal with taxes for them, 1099 workers are left to fend for themselves in the tax department. Being self-employed already comes with a lot of responsibility. You have to find your own clients, set your own hours and manage your finances. Dealing with taxes can also get overwhelming, especially with the IRS laws constantly changing. So, we’re breaking down everything from the latest self-employment tax rate, important self-employment tax forms, self-employed tax credits and how freelancers can use a self-employment tax calculator to easily calculate their 2024 SE tax.

Table of contents

What is self-employment tax?...Read more

How much is self-employment tax?...Read more

How to use a self-employed tax calculator in 2024...Read more

What are the important self-employment tax forms?...Read more

Self-employment tax deductions...Read more

Tax credits for the self-employed...Read more

What is self-employment tax?

Let’s start with the basics. If you work for yourself, you have to pay self-employed tax if you earn over $400 in 1099 income in a year. This threshold applies to net income, so after you write off business expenses. As we mentioned earlier, when you're employed full-time by a company, the payroll department generally takes care of withholding your income tax. Your employer also deducts Medicare and Social Security taxes, collectively known as FICA (Federal Insurance Contributions Act), from your paycheck. If you're self-employed, you are responsible for paying the self-employment tax, which includes both Social Security and Medicare taxes. This tax is calculated based on your taxable earnings and covers both the employee and employer portions. Self-employed individuals have to pay SE tax on top of federal and state income taxes. This makes keeping up with the latest tax law changes essential. Navigating self-employment taxes is a little more tricky as there are new rules and forms to deal with. We’ll talk about that in later sections.

How much is self-employment tax?

The self-employment tax rate for 2024 is still 15.3%, just like it was for 2023. This rate covers both Social Security and Medicare taxes. This is how it breaks down: 12.4% goes to Social Security and 2.9% goes to Medicare. If you're employed by a company, your employer handles these taxes, splitting the 15.3% between you and the company, with each paying 7.65%. But if you're self-employed, you're on the hook for the full 15.3% yourself. Keep in mind that the self-employment tax rate only applies to the first $160,200 of your taxable self-employment income in 2023. Anything you earn above that is only subject to the 2.9% Medicare tax. For the 2024 tax year, this cap goes up a bit, and the Social Security portion applies to the first $168,600 of earnings.
Infographic entitled Self-Employed Taxes describing the breakdown of SE tax.
You can use a self-employment tax calculator to easily do the math for you. If you want to try to calculate it yourself, remember that self-employed tax only applies to 92.35% of your net earnings.

How to use a self-employed tax calculator in 2024

Using an online calculator is the simplest way to find your self-employed tax liability. FlyFin’s tax calculator only asks you a few basic questions:
  • Your filing status
  • The state you’re filing in
  • Your gross 1099 income
  • W-2 income (if you have any)
  • Your estimated tax deduction amount
You can also ask a tax pro for help if you're new to working with the self-employment tax rate.

What are the important self-employment tax forms?

Self-employed taxpayers have the same filing deadline as W-2 taxpayers: April 15. This means filing both federal and self-employment tax forms by this day. Missing the deadline can result in late penalties, so make sure to file an extension if you need it. Something we haven’t mentioned yet is estimated tax payments. Self-employed taxpayers have to make quarterly tax payments to the IRS if they estimate they’ll owe over $1,000 in taxes. The deadlines usually fall on April 15, June 15, September 15 and January 15 of the next year. A quarterly tax calculator can help figure out your tax liability. You’ll be required to show your workings on Form 1040-ES and save a copy for your records. Schedule C is a crucial self-employment tax form for small business owners because it's where you report your business deductions, helping you save money. By subtracting these deductions from your gross income, you determine your net profit or loss. On Line 31, you'll calculate this net profit or loss by deducting your expenses from your income. This figure is essential for calculating your self-employment taxes on Schedule SE. You can actually claim 50% of your SE tax as a tax deduction. Schedule SE will walk you through calculating this deduction and show you exactly where to enter it on Form 1040. Self-employed taxpayers should also be familiar with three main 1099 forms– 1099-NEC, 1099-MISC and 1099-K.
  • 1099-NEC: This is the most common form, used to report nonemployee compensation of $600 or more.
  • 1099-K: This form is primarily for reporting third-party payment transactions over $600.
  • 1099-MISC: It's for reporting miscellaneous payments such as gifts, rent or award money.
Another self-employment tax form that freelancers may use is Form 8829, which is the home office deduction form. You might be able to claim certain expenses for using your home for business. But before you do, make sure your home office is your main place of business or a place where you regularly meet with clients. This part of your home must be used exclusively for business.
Infographic entitled Self-Employment Tax Forms listing important tax forms for self-employed individuals.

Self-employment tax deductions

As a freelancer, you're in charge of your own business, including managing your schedule, finding clients and handling your taxes. While dealing with the self-employment tax rate might not be the highlight of your day, you can use your business expenses to minimize your tax bill. There are numerous self-employment tax deductions available to freelancers, but whether you can claim them depends on your line of work and whether those costs are “ordinary and necessary” to your business. These deductions not only reduce your self-employment taxes but also lower your taxable income, helping you pay less in income taxes overall. So, it's important to claim them whenever possible. Some common tax deductions include:
  • Internet and phone bill
  • Vehicle mileage
  • Startup costs (for small businesses)
  • Business meals
  • Office supplies
  • CPA fees
  • Legal fees
  • Health insurance premiums
  • Business-related software subscriptions
A 1099 self-employment tax calculator can help you find all the business deductions you can write off. You just need to specify your line of work and select all the expenses that apply to you. Another tax break that self-employed individuals can use is tax credits.

Tax credits for the self-employed

Tax credits can significantly reduce the amount of tax you owe, and as a self-employed individual, you may be eligible for certain tax credits that can help lower your tax bill. One common tax credit for the self-employed is the Earned Income Tax Credit (EITC). The EITC is a refundable tax credit for low to moderate-income individuals and families. To qualify for the EITC, you must meet certain income requirements and file a tax return. Another valuable tax credit is the Child and Dependent Care Credit, which helps offset the cost of childcare expenses.
Infographic entitled Self-Employed Tax Credits listing tax credits that self-employed individuals can use to reduce taxes.
The IRS also offers the Clean Vehicle Credit to encourage drivers to go green by investing in electric or plug-in hybrid vehicles. It's a win-win situation - not only do you help reduce your carbon footprint, but you also get a tax incentive! This nonrefundable tax credit can lower your tax liability when you purchase certain electric car models. So, by choosing an environmentally friendly vehicle, you're not only doing your part for the planet but also saving some money on your taxes! For self-employed individuals, education tax credits can also be a valuable way to save money while investing in further education. The Lifetime Learning Credit and the American Opportunity Tax Credit are two common credits that may be available to self-employed taxpayers who are continuing their education. These credits can help with the cost of certain eligible education expenses. Paying self-employment tax doesn’t have to be a hassle. FlyFin’s expert CPAs can handle the entire tax prep and filing process for self-employed individuals and offer unlimited tax support. AI also scans expenses to find every possible business deduction to lower your tax bill and maximize your savings.

2024 Tax Filing

The tax filing deadline for the 2024 tax year is April 15, 2025. This is also the last day to file a tax extension. FlyFin is the best online tax filing tool for the self-employed.

2024 Tax Laws

Tax laws are always changing. FlyFin’s expert CPAs can monitor these changes and help you navigate them while handling your filing process and lowering your tax bill.

2024 Tax Brackets

Explore the changes in 2024 tax brackets and rates. Learn how they impact your finances, with insights on federal and state taxes, deductions, and effective tax rates.

2024 Estimated Tax Payments

Self-employed individuals have to make estimated tax payments to the IRS if they owe over $1,000. These payments are due throughout the year. Missing them can lead to penalties.

Tax Brackets - 2023 Vs 2024

The new 2024 tax brackets have higher income thresholds as they are adjusted for inflation. Freelancers can lower their tax bracket by writing off business deductions.

2024 IRS Mileage Calculator

The IRS mileage rate in 2023 was 65.5 cents/mile. In 2024, it was increased to 67 cents/mile. Self-employed individuals can also write off mileage-related tax deductions.

2024 Tax Credits

Tax credits reduce tax liability. There are many tax credits available to taxpayers. FlyFin’s CPAs can help you navigate the process.

2024 Tax Filing

The tax filing deadline for the 2024 tax year is April 15, 2025. This is also the last day to file a tax extension. FlyFin is the best online tax filing tool for the self-employed.

2024 Tax Laws

Tax laws are always changing. FlyFin’s expert CPAs can monitor these changes and help you navigate them while handling your filing process and lowering your tax bill.

2024 Tax Brackets

Explore the changes in 2024 tax brackets and rates. Learn how they impact your finances, with insights on federal and state taxes, deductions, and effective tax rates.

2024 Estimated Tax Payments

Self-employed individuals have to make estimated tax payments to the IRS if they owe over $1,000. These payments are due throughout the year. Missing them can lead to penalties.

What’s FlyFin?

FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. technology. Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes. In addition, you can download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and money.
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