Contractor income has two payroll-tax halves. Price the work after SE tax, deductions, and benefits.
A W-2 employee and their employer split the 15.3% Social Security and Medicare tax. When you're self-employed, you are both — so you owe the full 15.3% yourself, on top of regular income tax. With the default $120,000 profit minus $15,000 deductions, this tool shows about $14,836 in self-employment tax, $21,468 in income tax, a $9,076 quarterly estimated payment, and a W-2-equivalent take-home near $56,696 after replacing $12,000 of benefits.
The deductible half of SE tax lowers your income tax base, not the SE tax itself. The 0.9% Additional Medicare Tax on high earners is not modeled.
Profit — net self-employment profit before taxDeductions — ordinary business expenses (Schedule C)Base — 92.35% of net earnings (the SE tax base)rate — your marginal income tax rateThat W-2-equivalent figure is the rough yardstick for pricing contract work: it's what's left after both taxes and the benefits you now buy for yourself. Salaried roles bundle several of those costs into the employer's side.
| Component | Rate | Cap (2025) |
|---|---|---|
| Social Security (OASDI) | 12.4% | Net earnings up to $176,100 |
| Medicare (HI) | 2.9% | No cap |
| Combined SE tax | 15.3% | On 92.35% of net profit |
| Additional Medicare (high earners) | +0.9% | Over $200k single / $250k joint — not modeled |
| Half of the 15.3% SE tax is deductible against income tax. Rerun with your own numbers above. | ||
Educational only, not tax advice. This is a YMYL (Your Money or Your Life) topic. The model omits the 0.9% Additional Medicare Tax, QBI, state tax, credits, and filing-status brackets. Confirm your numbers with the IRS or a licensed tax professional before filing or making estimated payments.
Anyone with $400 or more in net earnings from self-employment — sole proprietors, independent contractors, 1099 freelancers, gig workers, and most single-member LLC and partnership members. It is reported on Schedule SE with your Form 1040. Wages already taxed on a W-2 are not subject to SE tax.
15.3% total: 12.4% for Social Security on net earnings up to the 2025 wage base of $176,100, plus 2.9% for Medicare with no income cap. High earners also owe an extra 0.9% Additional Medicare Tax above $200,000 single / $250,000 joint, which this calculator does not model.
You multiply net profit by 0.9235 before applying the 15.3% rate. The 7.65% reduction mirrors the employer-side payroll tax a W-2 employer would have paid and excluded from the employee's wages, so the self-employed are taxed on a comparable base.
Yes. You deduct 50% of the SE tax as an above-the-line adjustment to income on Schedule 1, which lowers your adjusted gross income and therefore your income tax. It does not reduce the SE tax itself — only the income tax on top of it.
Because no employer withholds tax, you generally prepay in four installments (around April 15, June 15, September 15, and January 15) if you expect to owe $1,000 or more. The IRS safe harbor is paying 90% of the current year or 100% of last year's tax (110% if prior-year AGI exceeded $150,000) to avoid an underpayment penalty.
The Qualified Business Income deduction lets eligible pass-through owners deduct up to 20% of qualified business income on their income tax (not SE tax), subject to taxable-income thresholds and limits for specified service businesses. It reduces income tax only and is claimed on Form 8995/8995-A.
An S-corp lets you split income into a reasonable W-2 salary (subject to payroll tax) and distributions (not subject to SE tax), which can lower total payroll tax at higher profits. It adds payroll, a separate return, and IRS scrutiny over reasonable compensation, so the savings usually justify it only above roughly $80,000–$100,000 of profit. Consult a CPA.
A W-2 employee splits the 15.3% payroll tax with the employer and gets benefits, withholding, and unemployment coverage. A 1099 contractor pays the full 15.3% SE tax, buys their own benefits, and makes quarterly payments. To net the same, contract pay typically needs to be meaningfully higher than the equivalent salary.
Yes. Ordinary and necessary business expenses reduce net profit on Schedule C, and SE tax is computed on that net profit (then the 92.35% factor). Lowering net profit with legitimate deductions reduces both SE tax and income tax.
It is roughly what is left of your net profit after SE tax, income tax, and the annual benefits you would have to buy yourself — a rough comparison to a salaried job's take-home. With the default $120,000 profit, $15,000 deductions, 22% rate, and $12,000 benefits, it is about $56,696.