Ordinary income and one freelance business. The model compares the same household with and without that business. Capital gains, AMT, NIIT and income-dependent credits require a reviewed tax basis. The selected state supplies an illustrative budget rate. Confirm or replace it with a reviewed effective rate; this is not a state return calculation. This plan uses household federal liability. It does not include the separate state budget estimate. Cash kept in reserve is not a payment sent to a tax authority. Inputs stay local until you choose Save or include them in a reviewed link.
Why freelancers owe self-employment tax
Employees and employers split Social Security and Medicare taxes — 7.65% each, 15.3% total. When you are self-employed you are both, so you pay the full 15.3% yourself. That is self-employment (SE) tax, and it is calculated on 92.35% of your net earnings, on top of regular income tax. The Social Security portion (12.4%) stops at the annual wage base ($184,500 in 2026); the Medicare portion (2.9%) never caps, and an extra 0.9% kicks in above $200,000 single / $250,000 married.
Only half of regular SE Social Security and Medicare tax is deductible from income; Additional Medicare Tax is excluded.
Blank payroll-wage fields use the corresponding entered wages. Your spouse’s wages never use up your Social Security wage base.
Enter allowed income-tax deductions, not gross contributions or premiums. Business retirement is applied before the health-insurance profit limit. Neither deduction reduces regular SE tax.
Entered amounts retain their numeric precision; displayed tax results round to cents.
The 25–30% rule of thumb — and why it's rough
Ordinary income and one freelance business. The model compares the same household with and without that business. Capital gains, AMT, NIIT and income-dependent credits require a reviewed tax basis.
A negative tax change is retained in the bridge. The recommended cash reserve is never negative; a zero or loss has no profit-percentage rate.
Cash costs are separate from tax deductions and tax payments. Blank costs are not treated as confirmed zero; the after-tax profit figure is shown before these personal cash uses.
The selected state supplies an illustrative budget rate. Confirm or replace it with a reviewed effective rate; this is not a state return calculation.
The curve samples the same household baseline and includes the entered point and SE wage-cap boundaries. It is not a global optimization. Unknown deductions leave gaps; zero profit has no percentage rate.
A 30% reserve rate applies to profit, not gross receipts. An invoice of $1,000 with $400 deductible expenses has $600 profit, so the reserve is $180, equivalent to 18% of receipts rather than $300. This illustrates the conversion using an assumed rate; your modeled household determines its own rate.
Quarterly due dates and the underpayment penalty
Because nobody withholds for you, the IRS expects estimated payments four times a year: April 15, June 15, September 15, and January 15 of the following year. Miss them — or underpay — and you can owe an underpayment penalty even if you settle up by the filing deadline. The penalty is essentially interest on the tax you should have prepaid. Pay online through IRS Direct Pay or EFTPS, and keep your set-aside in a separate high-yield account so it is there when each due date arrives.
This plan uses household federal liability. It does not include the separate state budget estimate. Cash kept in reserve is not a payment sent to a tax authority.
Enter payments already remitted for the selected tax year. A late payment reduces later balances but does not erase an earlier missed deadline. No payment or bank transfer is made by this calculator.
Expected annual withholding is allocated equally across the four due dates. An actual-date withholding election requires a separately reviewed worksheet.
Payments entered for the business reserve budget are separate from this dated federal-payment ledger. Enter a federal remittance here with its actual date to assess its timing.
Safe-harbor targets and the remaining filing balance
The ordinary annual benchmark is the smaller of 90% of modeled current-year federal tax and the confirmed eligible prior-year basis. That prior basis is 100% of prior tax, or 110% when the prior-year AGI test applies; timely installments and withholding still matter.
The prior-year method requires an eligible full 12-month return. The 110% rule uses prior-year AGI above $150,000, or $75,000 for married filing separately. Farming/fishing and other special estimated-tax rules are outside this ordinary plan.
Current-year planning target only. Incomplete prior-year facts do not establish the minimum annual safe-harbor amount.
Meeting a safe-harbor target can still leave tax due at filing. The target is not a full payment of the expected annual liability.
Expected annual withholding is allocated equally across the four due dates. An actual-date withholding election requires a separately reviewed worksheet.
Enter payments already remitted for the selected tax year. A late payment reduces later balances but does not erase an earlier missed deadline. No payment or bank transfer is made by this calculator.
QBI and what this estimate leaves out
The ordinary QBI deduction applies the dated taxable-income cap, business W-2/property limits and SSTB rules. For 2026, qualifying active QBI of at least $1,000 may support a $400 minimum after the ordinary cap, subject to material participation. Unknown participation is not silently treated as eligible or ineligible.
QBI is reduced by the business share of the SE-tax deduction, retirement and health-insurance deductions. This model covers one business without aggregation, prior QBI losses, REIT/PTP or cooperative adjustments.
These entered credit amounts are held fixed in both household scenarios. The model does not calculate credit eligibility or income-based phaseouts.
The ordinary age/blindness additions are separate from the enhanced deduction. An entered eligible count must also meet the SSN and joint-filing rules; no SSN or birth date is collected. The default age-based count remains an assumption.
This loss may require the excess-business-loss worksheet. Household income tax and the total remain incomplete; no unrestricted loss benefit or carryforward is assumed.
Entered amounts retain their numeric precision; displayed tax results round to cents.