Estimate your self-employment tax, deductions, and quarterly payments for the 2025 tax year
Calculate Your Self-Employment Taxes
Understanding Self-Employment Tax
Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It’s similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.
2025 Self-Employment Tax Rates
For 2025, the self-employment tax rate is 15.3%. This rate consists of two parts:
- 12.4% for Social Security tax (applies to the first $176,100 of net earnings)
- 2.9% for Medicare tax (applies to all net earnings)
- Additional 0.9% Medicare tax for high-income earners with income above $200,000 (single) or $250,000 (married filing jointly)
Who Pays Self-Employment Tax?
You must pay self-employment tax if your net earnings from self-employment were $400 or more. This includes:
- Freelancers and independent contractors
- Sole proprietors
- Partners in a partnership
- LLC members (in most cases)
- Gig workers and on-demand workers
Self-Employment Tax Deductions
Self-employed individuals can take advantage of various tax deductions to reduce their overall tax burden. Here are some key deductions to consider:
Self-Employment Tax Deduction
You can deduct 50% of your self-employment tax when calculating your adjusted gross income. This deduction is available whether or not you itemize your deductions.
Qualified Business Income Deduction
The QBI deduction allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income on their taxes.
For 2025, this deduction is subject to income limits: $191,950 for single filers and $383,900 for joint filers. Above these thresholds, the deduction may be limited based on your business type.
Home Office Deduction
If you use part of your home regularly and exclusively for your business, you may be eligible to deduct home office expenses. You can choose between:
- Simplified method: Deduct $5 per square foot of your home office (up to 300 square feet)
- Regular method: Deduct the actual expenses based on the percentage of your home used for business
Health Insurance Premiums
Self-employed individuals can deduct 100% of health insurance premiums for themselves, their spouse, and their dependents as an adjustment to income, rather than as an itemized deduction.
Retirement Plan Contributions
Contributions to qualified retirement plans like SEP IRAs, SIMPLE IRAs, or Solo 401(k)s are tax-deductible. For 2025, contribution limits are:
- SEP IRA: Up to 25% of net self-employment income or $69,000, whichever is less
- Solo 401(k): Up to $23,000 as employee contribution, plus up to 25% of compensation as employer contribution (total limit of $69,000)
Other Common Business Deductions
- Business travel expenses
- Vehicle expenses (actual expenses or standard mileage rate)
- Business insurance premiums
- Professional services (legal, accounting, etc.)
- Office supplies and equipment
- Business phone and internet
- Continuing education related to your business
- Advertising and marketing expenses
Estimated Quarterly Tax Payments
Unlike employees who have taxes withheld from their paychecks, self-employed individuals generally need to make quarterly estimated tax payments to cover their tax liability throughout the year.
2025 Quarterly Payment Due Dates
- First Quarter (January 1 – March 31): April 15, 2025
- Second Quarter (April 1 – May 31): June 16, 2025
- Third Quarter (June 1 – August 31): September 15, 2025
- Fourth Quarter (September 1 – December 31): January 15, 2026
Who Should Make Quarterly Payments?
You generally need to make estimated tax payments if:
- You expect to owe at least $1,000 in tax after subtracting withholding and refundable credits
- You expect your withholding and refundable credits to be less than:
- 90% of the tax to be shown on your current year’s tax return, or
- 100% of the tax shown on your prior year’s tax return (110% if your adjusted gross income was more than $150,000)
Avoiding Penalties
If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. To avoid this:
- Make equal quarterly payments based on your estimated annual tax liability
- Pay at least 100% of your previous year’s tax (110% if your AGI was above $150,000)
- Use Form 1040-ES to calculate your estimated tax payments
Frequently Asked Questions
What is the self-employment tax rate for 2025?
The self-employment tax rate for 2025 is 15.3%, which consists of 12.4% for Social Security (capped at $176,100) and 2.9% for Medicare (no income limit).
How is self-employment tax calculated?
Self-employment tax is calculated on 92.35% of your net self-employment income (your self-employment gross income minus your business expenses). This reduction reflects the employer-equivalent portion of self-employment tax.
Can I deduct part of my self-employment tax?
Yes, you can deduct 50% of your self-employment tax when calculating your adjusted gross income. This deduction doesn’t reduce your self-employment tax or self-employment income but does reduce your income tax.
Do I qualify for the 20% QBI deduction?
Most self-employed individuals with qualified business income can take the QBI deduction. However, there are income limitations and other restrictions for certain service businesses. For 2025, the income thresholds are $191,950 for single filers and $383,900 for joint filers.
What happens if I don’t make quarterly estimated tax payments?
If you don’t pay enough taxes throughout the year through quarterly estimated payments or withholding, you may have to pay an underpayment penalty when you file your tax return, in addition to any taxes owed.
How do I report self-employment income and taxes?
Self-employment income is typically reported on Schedule C, and self-employment tax is calculated on Schedule SE. Both are filed with your Form 1040 individual tax return.