The 15.3% Self-Employment Tax That Freelancers Often Overlook

Many freelancers and independent contractors focus on income tax but forget about another significant levy: the 15.3% self-employment tax. This combined Social Security and Medicare tax applies to net earnings from self-employment, and unlike employees who share the burden with their employers, freelancers pay the full amount. Understanding this tax is crucial for small business owners who want to avoid surprises at tax time. Quarterly estimated tax payments can help manage the cash flow impact, and proper deductions can reduce the total tax liability. If you're self-employed, be sure to factor this into your financial planning to keep more of your hard-earned money.