What a US freelancer pays that an employee doesn’t
An employee’s paycheck has Social Security and Medicare taken out, and the employer quietly pays the same amount again. A freelancer pays both halves. That is self-employment tax: 15.3% in total, made up of 12.4% for Social Security and 2.9% for Medicare, charged on 92.35% of net earnings from self-employment.
The Social Security part stops at the wage base, $184,500 for 2026 ($176,100 for 2025). Medicare has no cap, and an additional 0.9% applies to earnings above $200,000 for a single filer. Half of the self-employment tax, excluding that additional 0.9%, is deductible when you work out income tax.
Then there is income tax, which nobody withholds, plus state tax in most states, and health insurance that an employer might otherwise have subsidised. This calculator works backwards through all of it from the take-home you want.
How the calculation works
- Self-employment tax on 92.35% of profit, as above.
- Adjusted gross income: profit, less half of self-employment tax, less self-employed health insurance premiums.
- Taxable income: less the 2026 standard deduction of $16,100 for a single filer, and optionally the 20% qualified business income deduction.
- Federal income tax on the 2026 single brackets: 10% up to $12,400, then 12%, 22% from $50,400, 24% from $105,700, and higher rates above $201,775.
- State and local tax at the flat rate you enter, applied to adjusted gross income.
It then finds the profit at which what is left, after all of that and your health insurance, equals your target, adds your business expenses and divides by your billable hours.
A worked example
A single freelancer wants $70,000 a year after tax and health insurance. They bill 25 hours a week for 46 weeks, spend $8,000 a year on business costs and $6,000 on health insurance, and pay about 5% in state tax.
- Profit needed: about $102,552
- Self-employment tax: $14,490
- Federal income tax, after half of SE tax, health insurance, the standard deduction and QBI: $7,596
- State tax: $4,465
- Revenue to invoice, adding $8,000 of expenses: $110,552
- Hourly rate over 1,150 billable hours: $96.13
Dividing $70,000 by a 2,080-hour year suggests $33.65 an hour. The rate that actually delivers $70,000 is nearly three times that. Total tax is about 26% of profit, which is the share of every payment to set aside.
The qualified business income deduction
Many sole proprietors can deduct up to 20% of their qualified business income under section 199A. The 2025 One Big Beautiful Bill Act removed the deduction’s scheduled end after 2025. Below the 2026 threshold of $201,750 of taxable income for a single filer, the calculation is simple, and that is the version used here. Above it, the deduction can be limited or phased out, especially for specified service businesses such as consulting, law and accounting, and the calculator warns you when you cross it.
Paying the tax during the year
Because no tax is withheld, the IRS expects quarterly estimated payments using Form 1040-ES. Paying too little during the year can bring an underpayment penalty even if you pay in full in April. Setting aside the calculator’s tax percentage from every invoice, and paying from that reserve each quarter, avoids both the penalty and the scramble. The guide to reserving tax on irregular income covers how.
What this calculator leaves out
It assumes you file as single and have no other income, credits or itemised deductions. Retirement contributions such as a SEP-IRA or solo 401(k) would lower income tax but not self-employment tax. State taxes vary widely, from none in states such as Texas and Florida to progressive systems with local taxes on top, so the flat rate is an approximation. Use the result as a planning figure and confirm the details with a tax professional. For a version that does not model US taxes, use the general freelance hourly rate calculator.