Freelancer Taxes: Schedule C, SE Tax, and Estimates
Everything a first-year freelancer files — Schedule C, Schedule SE, quarterly estimates, and the deductions that matter
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
A freelancer is a sole proprietor for tax purposes. Income and expenses go on Schedule C, the net profit is subject to income tax and 15.3 percent self-employment tax (Schedule SE), and because no one withholds tax from freelance payments, the freelancer pays quarterly estimates. Setting aside 25 to 35 percent of net profit is the usual rule of thumb.
On this page
What forms does a freelancer file?
| Form | What it does | When |
|---|---|---|
| Schedule C (Form 1040) | Reports gross receipts and business expenses; the net profit is the freelancer's business income | With the annual return |
| Schedule SE | Computes self-employment tax on the Schedule C profit | With the annual return |
| Schedule 1 | Deducts half the self-employment tax, health insurance premiums, and retirement contributions | With the annual return |
| Form 8995 / 8995-A | Computes the 20 percent qualified business income deduction | With the annual return |
| Form 1040-ES | Quarterly estimated tax payments | April 15, June 15, September 15, January 15 |
| Form 4562 | Depreciation and section 179 for equipment above the de minimis threshold | With the return, if applicable |
| Form 8829 | Home office deduction under the regular method | With the return, if applicable |
No separate business return exists for a sole proprietor — everything attaches to the personal Form 1040. A single-member LLC files exactly the same way. Business clients who pay US$2,000 or more in a year (for payments made from 2026; US$600 before) issue a Form 1099-NEC in January; platforms and payment processors may issue a Form 1099-K. Neither form defines income: every dollar the business earned is reportable, with or without a form (the reporting guide).
How much tax does a freelancer pay?
Two taxes on the same profit. Self-employment tax is a flat 15.3 percent on 92.35 percent of net profit (12.4 percent Social Security up to the wage base plus 2.9 percent Medicare) — about 14.1 cents on every dollar of profit. Income tax is graduated and depends on total household income, the standard deduction, and the QBI deduction, which shelters 20 percent of the profit. A single freelancer netting US$60,000 with no other income pays roughly US$8,500 of self-employment tax and — after the standard deduction, the deductible half of self-employment tax, and the QBI deduction — roughly US$3,500 to US$4,000 of federal income tax, plus state tax. Combined, about 20 percent of profit; higher at higher incomes. The 25-to-35-percent set-aside covers the federal total and most states.
How do quarterly estimates work?
Because nothing is withheld, the IRS expects payment through the year: four installments due April 15, June 15, September 15, and January 15. The penalty-proof approach is the prior-year safe harbor — pay 100 percent of last year's total tax in four equal installments (110 percent if last year's adjusted gross income exceeded US$150,000) — and it works for a first-year freelancer too, based on last year's tax as a W-2 employee, as long as that return covered twelve months; the alternatives are estimating on projected profit or the annualized method if income is uneven. A freelancer with a W-2 job alongside can raise the job's withholding to cover the freelance tax and skip estimates entirely. The safe harbor guide covers the mechanics; the reserve habit — a fixed percentage of every payment moved to a tax account on receipt — is what makes the quarterly payment a transfer rather than a scramble.
What can a freelancer deduct?
Ordinary and necessary business expenses: the home office (exclusive-use room, simplified or regular method — and the mileage it converts from commuting to business), computer and equipment (under the de minimis election or section 179), software subscriptions, the business share of phone and internet, professional development that maintains skills, business insurance, marketing and the website, contractor payments (with 1099-NECs to anyone paid US$2,000 or more in the year), bank and processing fees, and travel and 50-percent meals for business. Above the line, separately: health insurance premiums (the self-employed health insurance deduction), retirement contributions (a SEP or Solo 401(k) — up to 20 percent of net profit (after the deductible half of self-employment tax) for the employer contribution, plus the Solo 401(k)'s deferral), and half the self-employment tax. The deductions freelancers most often miss are the home office and its mileage, the retirement contribution, and the QBI deduction.
Worked example
A first-year freelance writer grosses US$78,000, with US$14,000 of expenses (home office, laptop under de minimis, software, health insurance handled separately). Schedule C profit: US$64,000. Self-employment tax: US$64,000 × 0.9235 × 15.3% = US$9,043; deductible half US$4,522. Health insurance premiums US$6,000 and a SEP contribution US$10,000, both above the line. Adjusted gross income: US$43,478. After the standard deduction and the QBI deduction (20 percent of profit reduced by the three business-attributable adjustments), federal income tax is roughly US$2,400. Total federal: about US$11,400 — 18 percent of profit, because the retirement contribution and health insurance pulled income tax down. She had set aside 30 percent of profit (US$19,200) and paid four estimates on projected profit; the surplus funds next year's first installment.
Frequently asked questions
What forms does a freelancer file?
Schedule C for business income and expenses, Schedule SE for self-employment tax, Schedule 1 for the above-the-line deductions, Form 8995 for the QBI deduction — all attached to Form 1040 — and Form 1040-ES for quarterly estimates.
How much should a freelancer set aside for taxes?
Twenty-five to thirty-five percent of net profit covers federal income tax, self-employment tax, and most state taxes for typical incomes. The first year's return replaces the rule of thumb with a real figure.
Do freelancers pay quarterly?
Yes — estimated tax payments are due April 15, June 15, September 15, and January 15, unless withholding from a W-2 job covers the freelance tax.
What can freelancers deduct?
Ordinary and necessary business expenses on Schedule C (home office, equipment, software, phone and internet share, professional development, insurance, marketing, contractors, fees, travel), plus health insurance, retirement contributions, and half the self-employment tax above the line.
Official sources
The IRS states: “Use Schedule C (Form 1040) to report income or loss from a business you operated or a profession you practiced as a sole proprietor.” — Internal Revenue Service, About Schedule C (Form 1040), Profit or Loss from Business, https://www.irs.gov/forms-pubs/about-schedule-c-form-1040
The IRS states: “If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax.” — Internal Revenue Service, Estimated taxes, https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk handles first-year freelancer setup — Schedule C bookkeeping, estimated-tax projections and reserve rules, deduction reviews, and retirement and health insurance planning. See pricing or book a call.
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