Let's get something out of the way: freelance taxes are different. Not harder, not scarier—just different from what you experienced as a W-2 employee.
When you had a regular job, your employer handled everything. Taxes were withheld from every paycheck. A nice, tidy W-2 showed up in January. You plugged some numbers into TurboTax, maybe got a refund, and moved on with your life.
Now? You're the employer AND the employee. That means you're responsible for calculating, setting aside, and paying your own taxes—often four times a year. Nobody is going to remind you. Nobody is going to withhold anything. And if you mess it up, the IRS will be more than happy to charge you penalties and interest.
But here's the good news: once you understand how freelance taxes work, they're actually pretty straightforward. And the tax code gives freelancers way more opportunities to reduce their tax bill than traditional employees ever get.
This guide covers everything you need to know about freelance taxes in 2026—from the basics of what you owe to advanced strategies that can save you thousands. Whether you just landed your first client or you've been freelancing for years, we'll help you navigate the tax system with confidence.
The TL;DR on Freelance Taxes
- 1You'll pay 25-35% of your income in taxes — That includes self-employment tax (15.3%), federal income tax (10-37%), and state taxes (0-13%).
- 2You pay taxes four times a year — Quarterly estimated payments are due in April, June, September, and January.
- 3Deductions are your best friend — Every business expense you track reduces your tax bill. Home office, equipment, software, health insurance—it all counts.
What Are Freelance Taxes?
Freelance taxes are the combined federal, state, and local taxes that self-employed individuals pay on their business income. If you're a freelancer, independent contractor, consultant, gig worker, or run any kind of one-person business, this applies to you.
The key difference from regular employment is that nobody is withholding taxes from your income. When a client pays you $5,000 for a project, you get the full $5,000. It's up to you to set aside the right amount for taxes and pay it on time.
The Three Types of Taxes You'll Pay
As a freelancer, you'll deal with three main taxes:
Self-Employment Tax
15.3% of net income
This is the "employer's share" of Social Security and Medicare that you now have to pay yourself. It's the tax that surprises most new freelancers—and it applies to every dollar you earn, even if you're in a low income tax bracket.
Federal Income Tax
10-37% based on income
This is the same income tax everyone pays. Your rate depends on your taxable income and filing status. Most freelancers fall into the 12%, 22%, or 24% brackets.
State Income Tax
0-13% depending on state
Most states have their own income tax on top of federal. Nine states have no income tax at all, while California, New York, and a few others can add 10%+ to your bill.
How Much Will You Actually Pay?
Most freelancers end up paying 25-35% of their net income in total taxes. Here's a realistic example:
Example: Freelancer earning $75,000 in California
The Big Surprise for New Freelancers
When you had a W-2 job, your employer paid half of your Social Security and Medicare taxes (7.65%). As a freelancer, you pay the full 15.3% yourself. This is often the first shock for new freelancers—suddenly your tax bill is thousands of dollars higher than expected.
The good news? You can deduct half of self-employment tax from your income, which helps offset some of the cost.
Self-Employment Tax Explained
Self-employment tax is the tax that funds Social Security and Medicare. If you've ever looked at a pay stub from a W-2 job, you saw "FICA" deductions—that's the same thing. The difference is that employees only pay half (7.65%), while their employer pays the other half.
As a freelancer, you're both the employee and the employer. So you pay the full 15.3%.
The 15.3% breaks down like this:
- Social Security: 12.4% — Applies to the first $168,600 of net earnings (2026 limit). Once you earn more than this, you stop paying Social Security tax on the excess.
- Medicare: 2.9% — Applies to all net earnings with no cap. You pay this on every dollar you earn.
- Additional Medicare: 0.9% — Kicks in when your earnings exceed $200,000 (single) or $250,000 (married filing jointly).
How Self-Employment Tax Is Calculated
The IRS gives you a small break: instead of applying the 15.3% to your full net income, you first multiply by 92.35%. This adjustment accounts for the fact that employers can deduct their share of FICA taxes.
Step-by-Step Calculation:
Your self-employment tax on $80,000 of net income would be $11,304.
The 50% Deduction (Your Silver Lining)
Here's a bit of relief: you can deduct half of your self-employment tax from your gross income when calculating your income tax. This is an "above-the-line" deduction, meaning you get it even if you take the standard deduction.
In the example above, you'd deduct $5,652 ($11,304 ÷ 2) from your income before calculating federal income tax. On a 22% tax bracket, that saves you about $1,243 in income taxes.
Pro Tip: The S-Corp Strategy
If you're consistently earning $80,000+ per year, you can potentially save thousands on self-employment tax by electing S-corp status. You pay yourself a "reasonable salary" (subject to SE tax), and the rest comes as distributions (not subject to SE tax). We cover this in detail in the Tax Strategies section.
Federal Income Tax for Freelancers
Federal income tax works the same for freelancers as it does for everyone else—you pay based on your taxable income and filing status. The difference is that freelancers often have more control over their taxable income because of business deductions.
2026 Federal Tax Brackets
The US uses a progressive tax system with seven brackets. Important: these are marginal rates, meaning you only pay that rate on the income within each bracket—not your entire income.
| Tax Rate | Single Filer Income | Married Filing Jointly |
|---|---|---|
| 10% | $0 – $11,600 | $0 – $23,200 |
| 12% | $11,601 – $47,150 | $23,201 – $94,300 |
| 22% | $47,151 – $100,525 | $94,301 – $201,050 |
| 24% | $100,526 – $191,950 | $201,051 – $383,900 |
| 32% | $191,951 – $243,725 | $383,901 – $487,450 |
| 35% | $243,726 – $609,350 | $487,451 – $731,200 |
| 37% | Over $609,350 | Over $731,200 |
Example: How marginal tax brackets work
Let's say you're single with $60,000 in taxable income. You don't pay 22% on the whole amount. Instead:
- • First $11,600 taxed at 10% = $1,160
- • Next $35,550 ($11,601-$47,150) taxed at 12% = $4,266
- • Remaining $12,850 ($47,151-$60,000) taxed at 22% = $2,827
- Total federal income tax: $8,253 (effective rate: 13.8%)
Standard Deduction vs. Itemizing
Before calculating your tax, you reduce your income by either the standard deduction or itemized deductions—whichever is larger. For 2026:
- Standard Deduction (Single): $14,600
- Standard Deduction (Married Filing Jointly): $29,200
- Standard Deduction (Head of Household): $21,900
Important: Business deductions on Schedule C are separate from the standard deduction. You can claim both! So if you have $10,000 in business expenses, those reduce your self-employment income before you even get to the standard deduction.
State Taxes by Location
Your state income tax can add anywhere from 0% to over 13% to your total tax bill. For freelancers who can work from anywhere, this is one of the biggest financial decisions you can make.
States with No Income Tax
Nine states have no state income tax on earned income, making them popular destinations for freelancers looking to keep more of what they earn:
Moving from California (9.3%+ tax) to Texas (0% tax) on a $100,000 income could save you $9,300+ per year. Of course, there are other factors to consider—cost of living, clients, lifestyle—but from a pure tax perspective, it's significant.
States with High Income Tax
On the other end of the spectrum, these states have the highest tax rates:
View all 51 state tax calculators →
Where You Live vs. Where Your Client Is
You pay state taxes based on your state of residence, not where your client is located. If you live in Florida and have clients in New York, you don't owe New York state taxes. There are some exceptions for physical presence in other states, but for typical remote freelance work, you only worry about your home state.
Quarterly Estimated Tax Payments
This is where a lot of new freelancers trip up. Unlike W-2 employees who have taxes withheld every paycheck, you have to pay the IRS four times a year. Miss these payments, and you'll face penalties—even if you pay everything you owe when you file your return.
2026 Quarterly Due Dates
| Quarter | Income Period | Due Date |
|---|---|---|
| Q1 | January 1 – March 31 | April 15, 2026 |
| Q2 | April 1 – May 31 | June 15, 2026 |
| Q3 | June 1 – August 31 | September 15, 2026 |
| Q4 | September 1 – December 31 | January 15, 2027 |
Notice that Q2 only covers 2 months (April-May) while Q3 covers 3 months (June-August). The IRS loves to keep things interesting.
Two Methods for Calculating Quarterly Payments
There are two IRS-approved ways to figure out how much to pay each quarter:
Method 1: Current Year Estimate
Estimate your total tax for the year and pay 25% each quarter. Works well if your income is consistent month-to-month.
Example: You expect $15,000 in total taxes
Pay $3,750 each quarter
Method 2: Prior Year Safe Harbor
Pay 100% of last year's tax liability, divided into four payments. Guarantees no underpayment penalty—even if you earn more this year.
Exception: If your AGI exceeded $150,000, you need to pay 110% of last year's tax.
Our Recommendation
If your income varies a lot, the prior year safe harbor is the safest approach. You'll never face penalties, even if you have a great year. Just pay 100% (or 110% if high income) of last year's total tax divided by four.
Use our quarterly tax calculator to get your exact payment amounts.
Underpayment Penalties
If you don't pay enough throughout the year, the IRS charges an underpayment penalty. The current rate is approximately 8% annually on the amount you should have paid by each quarterly due date.
You can avoid penalties by:
- Paying at least 90% of your current year tax liability, OR
- Paying 100% of your prior year tax liability (110% if AGI exceeds $150,000)
The penalty isn't catastrophic—usually a few hundred dollars—but it's completely avoidable with proper planning.
Tax Deductions for Freelancers
Deductions are where freelancers win. Every legitimate business expense you track reduces your taxable income, saving you money on both self-employment tax and income tax.
Think of it this way: if you're in the 22% tax bracket and pay 15.3% self-employment tax, every $100 you deduct saves you about $37 in taxes.
Home Office Deduction
If you use part of your home regularly and exclusively for business, you can deduct it. This is one of the most valuable deductions for freelancers who work from home.
Simplified Method
- • $5 per square foot of home office
- • Maximum 300 square feet
- • Maximum deduction: $1,500
- • No depreciation calculations
Best for: Simple setups, those who don't want to track expenses
Regular Method
- • Calculate % of home used for business
- • Deduct that % of rent, utilities, insurance
- • No maximum deduction
- • Requires Form 8829
Best for: Larger home offices, high housing costs
The "Exclusively" Rule
Your home office must be used only for business. If you use your desk for both work and personal stuff (gaming, browsing social media), technically you don't qualify. A dedicated room or clearly separated space is ideal.
Equipment and Software
Everything you buy for your business is deductible. This includes:
- Computers, laptops, tablets
- Monitors, keyboards, mice
- Cameras, microphones, lighting
- Software subscriptions (Adobe, Microsoft, Figma, etc.)
- Website hosting and domains
- Project management tools
Items over $2,500 technically need to be depreciated over time, but Section 179 usually lets you deduct the full cost in the year of purchase. Most tax software handles this automatically.
Vehicle and Mileage
If you drive for business—client meetings, supply runs, trips to the post office—you can deduct vehicle expenses. There are two methods:
- Standard Mileage Rate: 70 cents per mile for 2026. Just track your business miles.
- Actual Expense Method: Track gas, maintenance, insurance, depreciation, and calculate the business percentage.
The standard mileage rate is simpler and often better for most freelancers. If you drive 5,000 miles for business, that's a $3,500 deduction.
Health Insurance
This is a huge one. Self-employed individuals can deduct 100% of health insurance premiums for themselves, their spouse, and dependents. This is an above-the-line deduction that reduces both your income tax and AGI.
If you pay $500/month for health insurance, that's a $6,000 annual deduction—saving you roughly $2,200 in taxes.
Retirement Contributions
Retirement accounts are one of the best tax-saving tools for freelancers. You can contribute significant amounts and deduct every dollar:
SEP IRA
Up to 25% of net self-employment income
Solo 401(k)
$23,000 as employee + 25% as employer
Traditional IRA
Standard contribution limits
If you earn $100,000 and contribute $25,000 to a SEP IRA, you just saved yourself $9,300+ in taxes while building your retirement fund.
Other Common Deductions
Don't forget these:
- ✓Professional development (courses, books)
- ✓Professional services (accounting, legal)
- ✓Marketing and advertising
- ✓Business travel
- ✓Meals with clients (50%)
- ✓Phone and internet (business %)
- ✓Coworking space membership
- ✓Business insurance
- ✓Bank and payment processing fees
- ✓Office supplies
Tax Forms You Need to File
Freelance taxes involve more forms than a typical W-2 return. Here's what you'll file and what each form does:
Schedule C (Form 1040)
Required for all freelancers
Reports your business income and expenses. This is the main form where you list all your 1099 income, calculate expenses, and determine your net profit or loss. The bottom line flows to your Form 1040.
Schedule SE (Form 1040)
Required if net earnings exceed $400
Calculates your self-employment tax (15.3%). Takes your net income from Schedule C and applies the SE tax formula. Most tax software fills this out automatically.
Form 1040-ES
Used for quarterly payments
Payment vouchers for your quarterly estimated tax payments. You don't actually file this with your return—you use it throughout the year when making payments.
Form 8829
If claiming home office (regular method)
Calculates your home office deduction using the actual expense method. Not needed if you use the simplified method ($5/sq ft).
Form 4562
If depreciating assets or using Section 179
Reports depreciation and Section 179 deductions for business assets. Needed if you bought expensive equipment and want to deduct it all in year one.
Tax Strategies to Save Money
Now let's get to the good stuff—strategies that can save you thousands of dollars every year. These aren't loopholes or sketchy tactics. They're legitimate tax planning strategies that the IRS specifically allows.
1. Track Every Single Expense
This is the foundation. Every business expense you miss is money left on the table. If you're in the 22% bracket and pay 15.3% self-employment tax, a $100 missed deduction costs you $37.
Use a dedicated business bank account and credit card. Use accounting software or an app like WorkMade to automatically categorize transactions and flag potential deductions.
2. Maximize Retirement Contributions
A SEP IRA or Solo 401(k) can shelter a huge chunk of your income from taxes. If you earn $100,000 and contribute $25,000 to a SEP IRA:
- You save ~$9,300 in taxes (at 37% combined rate)
- Your $25,000 grows tax-free until retirement
- You reduce your AGI, which can help with other deductions
3. Time Your Income and Expenses
Most freelancers use cash-basis accounting, which means income counts when you receive it and expenses count when you pay them. This gives you flexibility:
- Defer income: If you're close to a tax bracket, delay sending invoices until January
- Accelerate expenses: Prepay January expenses in December, buy equipment before year-end
4. Consider S-Corp Election
This is one of the most powerful tax strategies for successful freelancers. Here's how it works:
Normally, you pay 15.3% self-employment tax on all your net income. With S-corp election, you:
- Pay yourself a "reasonable salary" (subject to SE tax)
- Take the remaining profit as distributions (not subject to SE tax)
Example: S-Corp Savings on $120,000 Income
Without S-Corp (Sole Prop)
- SE tax on $120,000: $16,956
With S-Corp Election
- Salary: $60,000 (SE tax: $9,180)
- Distribution: $60,000 (no SE tax)
- Total SE tax: $9,180
Annual savings: $7,776
S-corp election makes sense when you're consistently earning $80,000+ and the savings outweigh the added complexity (payroll, additional tax filings).
5. Use the QBI Deduction
The Qualified Business Income (QBI) deduction lets you deduct up to 20% of your net business income. It's like getting a 20% discount on your taxes.
Most freelancers earning under $170,050 (single) or $340,100 (married) qualify. There are some restrictions for certain service businesses at higher income levels, but for most freelancers, this is free money.
Common Mistakes to Avoid
We see these mistakes constantly. Avoiding them will save you money, stress, and potential IRS headaches.
1. Not paying quarterly taxes
This leads to penalties AND a massive April surprise. Set aside 25-30% of every payment you receive and pay quarterly. No exceptions.
2. Mixing personal and business finances
Using your personal account for business makes tracking expenses a nightmare. Get a separate business bank account and credit card. It makes everything easier at tax time.
3. Missing deductions
Many freelancers overpay because they don't track expenses or don't know what qualifies. If it's a legitimate business expense, track it and deduct it.
4. Forgetting about state taxes
Your state wants quarterly payments too (unless you're in a no-income-tax state). Don't just pay the IRS—check your state requirements.
5. The $600 myth
You don't need to earn $600+ to owe taxes. You owe taxes on all self-employment income over $400 for the year, regardless of whether you receive a 1099 form. The $600 threshold is just when clients are required to send you the form.
6. Filing late
Late filing penalties are 5% per month on unpaid taxes, up to 25%. If you can't pay, still file on time and set up a payment plan. The penalty for not filing is much worse than the penalty for not paying.
First-Year Freelancer Survival Guide
Just started freelancing? Here's exactly what you need to do to stay on top of taxes from day one:
Your First-Year Checklist
Open a separate business bank account
Keep business and personal finances completely separate. It makes tracking expenses infinitely easier.
Set aside 30% of every payment
Transfer 25-30% of every client payment to a separate savings account immediately. This is your tax fund. Don't touch it.
Track expenses from day one
Every business purchase, every mile driven. Use an app like WorkMade to categorize automatically, or at minimum keep a spreadsheet.
Mark quarterly due dates in your calendar
April 15, June 15, September 15, January 15. Set reminders a week before each date.
Make your first quarterly payment
Use our calculator to estimate how much to pay. If unsure, start with 25% of your net income. You can always adjust later.
Your First Year: What to Expect
The first year is the hardest because you're figuring everything out. Here's a realistic timeline:
- Months 1-3: Focus on getting clients and tracking income/expenses
- First quarterly due date: Make an estimated payment (even if small)
- End of year: Review total income and expenses, consider year-end tax moves
- April 15: File your first Schedule C, pay any remaining tax
Don't stress about getting it perfect. The IRS isn't going to come after you for minor mistakes. Just do your best to track everything, pay quarterly, and file on time.
Free Freelance Tax Calculator
Use our free 1099 tax calculator to estimate your federal, state, and self-employment taxes. It takes about 30 seconds and gives you exact numbers for your quarterly payments.
Calculate Your Freelance Taxes
Select your state to get an instant estimate of your tax liability, quarterly payment amounts, and take-home pay.
Frequently Asked Questions
How much tax do freelancers pay?
Freelancers typically pay 25-35% of their net income in taxes. This includes self-employment tax (15.3%), federal income tax (10-37%), and state income tax (0-13% depending on your state). The exact amount depends on your income, deductions, and location.
What is self-employment tax?
Self-employment tax is 15.3% of your net self-employment income. It covers Social Security (12.4%) and Medicare (2.9%). Unlike W-2 employees who split this with their employer, freelancers pay the full amount. You can deduct half of it from your income tax.
When are quarterly taxes due?
Quarterly estimated tax payments are due on April 15, June 15, September 15, and January 15 of the following year. Missing these deadlines can result in underpayment penalties of around 8% annually.
What can freelancers deduct?
Freelancers can deduct business expenses including home office costs, equipment, software, professional development, travel, health insurance premiums, retirement contributions, and professional services like accounting.
Do I need to pay taxes if I made less than $600?
Yes. The $600 threshold only applies to when clients must send you a 1099 form. You must report all self-employment income regardless of amount if your net earnings exceed $400 for the year.
How do I avoid owing taxes as a freelancer?
Make quarterly estimated tax payments throughout the year, track all business expenses for deductions, contribute to tax-advantaged retirement accounts (SEP IRA, Solo 401k), and consider forming an S-corp if you earn over $80,000.
What forms do freelancers need to file?
Freelancers file Form 1040 with Schedule C (business income/expenses) and Schedule SE (self-employment tax). You may also need Schedule 1, Form 8829 (home office), and Form 4562 (depreciation).
Can I deduct my home office?
Yes, if you use a dedicated space regularly and exclusively for business. You can use the simplified method ($5/sq ft, max $1,500) or the regular method (actual expenses proportional to space used).
What happens if I don't pay quarterly taxes?
If you don't pay quarterly estimated taxes and owe more than $1,000 at tax time, you'll face an underpayment penalty of approximately 8% annually on the amount you should have paid. The IRS charges interest from each quarterly due date.
Should I form an LLC for my freelance business?
An LLC provides liability protection but doesn't change your tax situation by default—you'll still file Schedule C. However, an LLC taxed as an S-Corp can save you thousands in self-employment tax once you're earning $80,000+ consistently.
How do I track business expenses for taxes?
Use a dedicated business bank account and credit card for all business transactions. Apps like WorkMade automatically categorize transactions and identify tax deductions. Keep digital copies of receipts for purchases over $75.
Can I deduct health insurance as a freelancer?
Yes! Self-employed individuals can deduct 100% of health insurance premiums for themselves, their spouse, and dependents. This is an above-the-line deduction that reduces your AGI, saving you money on both income tax and self-employment tax.
Take Control of Your Freelance Taxes
Freelance taxes don't have to be overwhelming. Yes, there's more to think about than a regular W-2 job. But with the right systems in place, it becomes just another part of running your business.
Here's what to remember:
- Set aside 25-30% of every payment — This is your tax fund. Don't touch it.
- Pay quarterly — April 15, June 15, September 15, January 15. Mark them in your calendar.
- Track every business expense — Each deduction saves you money.
- Max out retirement contributions — This is the best tax shelter available to freelancers.
- Consider S-corp at $80k+ — It can save you thousands in self-employment tax.
If you want to automate the entire process, WorkMade tracks your income, finds deductions, calculates your quarterly taxes, and files your return. Our team of tax professionals handles everything so you can focus on what you do best—the actual work.