Calculate exactly how much to set aside for self-employment tax, federal income tax, and state income tax. Stop guessing — know your real tax obligation so you can plan confidently.
When you work for yourself, you're responsible for both the employer and employee portions of Social Security and Medicare taxes. This is called self-employment (SE) tax, and it's 15.3% of your net earnings. Here's how it breaks down:
| Tax Type | Rate | Applied To | Cap (2026) |
|---|---|---|---|
| Social Security | 12.4% | 92.35% of net earnings | $184,500 |
| Medicare | 2.9% | 92.35% of net earnings | No cap |
| Total SE Tax | 15.3% | 92.35% of net earnings | SS portion capped |
Your total tax reserve includes SE tax + federal income tax + state income tax. Here's what to expect at different income levels:
| Annual Net Profit | SE Tax | Federal Tax | Total (no state) | Effective Rate |
|---|---|---|---|---|
| $50,000 | ~$7,065 | ~$2,667 | ~$9,732 | ~19% |
| $75,000 | ~$10,597 | ~$4,898 | ~$15,495 | ~21% |
| $100,000 | ~$14,130 | ~$8,235 | ~$22,365 | ~22% |
| $150,000 | ~$21,194 | ~$16,413 | ~$37,608 | ~25% |
| $200,000 | ~$28,234 | ~$25,196 | ~$53,431 | ~27% |
* Estimates assume Single filer, 2026 brackets, no state tax. Add your state rate on top. Use the calculator for exact figures.
Reducing your net profit through legitimate deductions directly lowers your tax reserve. Don't overlook these common deductions:
A safe rule of thumb is 25-35% of your net profit, depending on your income level, state, and filing status. This covers self-employment tax (15.3%), federal income tax, and state income tax. Use a calculator to get a precise number for your situation.
Self-employment tax is the Social Security and Medicare tax for people who work for themselves. It's 15.3% (12.4% Social Security + 2.9% Medicare) applied to 92.35% of your net earnings. The Social Security portion is capped at $184,500 in 2026. This is in addition to income tax.
For the 2026 tax year, estimated tax payments are due: April 15, 2026 (Q1); June 15, 2026 (Q2); September 15, 2026 (Q3); January 15, 2027 (Q4). When a date falls on a weekend or holiday, it moves to the next business day. Missing these deadlines can result in underpayment penalties.
If you underpay your estimated taxes by too much, you'll face a large tax bill at filing time plus potential underpayment penalties from the IRS. The penalty is calculated based on the federal short-term interest rate plus 3 percentage points. It's much better to over-reserve slightly than to come up short.
Yes. Legitimate business expenses reduce your net profit, which directly reduces your tax obligation. Common deductions include home office, software subscriptions, professional development, health insurance premiums, and retirement contributions (SEP-IRA, Solo 401k).
It depends on your state. Nine states don't tax earned income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. All other states tax self-employment income at rates ranging from about 2% to over 13%.
Related tools:Owner Pay Guide|Pay Percentage Guide