Self-Employed Taxes: How They Work and How to Pay Less

The self-employment tax

When you're self-employed, you don't have an employer withholding taxes from your paycheck. Instead, you pay self-employment (SE) tax directly to the IRS. The SE tax rate is 15.3% on your net self-employment income, broken down as:

As a self-employed person, you pay both the employee share and the employer share. However, you can deduct 50% of your SE tax as an adjustment to income on your Form 1040 — this partially offsets the double-tax burden.

Schedule C: where the numbers live

You report all self-employment income and deductions on Schedule C (Profit or Loss from Business), attached to your Form 1040. Line 1 is your gross income; Part II is your expenses. The bottom-line profit (or loss) flows to Schedule SE for the SE tax calculation, and then to your 1040 for income tax.

Maximizing your Schedule C deductions is the single most effective way to reduce both your income tax and your self-employment tax simultaneously.

Quarterly estimated tax payments

Since no employer withholds taxes for you, the IRS requires most self-employed people to pay taxes four times a year. Missing these payments can result in underpayment penalties.

Use Form 1040-ES to calculate and submit quarterly payments, or use our quarterly tax estimate calculator.

How to lower your SE tax bill

Every dollar of legitimate deduction you claim on Schedule C reduces your net self-employment income — which means you pay less SE tax AND less income tax. These are the highest-impact deductions:

• Home office deduction
• Vehicle mileage ($0.70/mile in 2025)
• Health insurance premiums
• Retirement contributions (SEP-IRA, Solo 401k)
• Equipment, software, and subscriptions
• Professional development and courses
• Half of your self-employment tax

Frequently Asked Questions

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