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The 15.3% surprise, computed before it surprises you.
The first year of freelancing comes with a shock: self-employment tax, both halves of Social Security and Medicare, charged on 92.35% of your net profit. This calculator breaks it into the Social Security part (capped at the 2026 wage base of $184,500), the Medicare part (uncapped), the total, and the employer-half deduction that reduces your income tax.
New freelancers use it the week they quit their job — the 15.3% nobody mentioned — and veterans use it to sanity-check their books. It separates the capped Social Security part from uncapped Medicare so high earners see exactly where the tax changes shape.
15.3% of 92.35% of net profit — an effective 14.13% on profit under the Social Security cap. On $90,000 of profit that is $12,716.60: $10,306.26 Social Security (12.4%) and $2,410.34 Medicare (2.9%). Above $184,500 the Social Security part stops and only Medicare (plus a 0.9% surtax over $200k/$250k) continues.
Employees pay 7.65% and employers pay 7.65%; the self-employed pay both. To equalize, the IRS lets you compute SE tax on 92.35% of profit (100% minus the 7.65% employer share) — then also deduct half the SE tax from income. The two adjustments roughly mirror what an employer would have paid and deducted.
Business expenses reduce the profit it is charged on — every legitimate deduction saves 14.13% in SE tax plus income tax. At higher incomes, an S-corp election splits income into salary (SE-taxed) and distributions (not), though it adds payroll costs and a reasonable-salary requirement. Retirement contributions (SEP-IRA, Solo 401k) cut income tax but not SE tax.