What you owe as a freelancer
Freelance income can create three separate tax obligations:
- Income tax at your marginal rate on net profit, using the same brackets as other individual income.
- Self-employment tax at 15.3% on net earnings. An employee pays 7.65% and their employer pays the other 7.65%; you are both, so you pay both. Half of it is deductible against income tax, which softens the blow slightly.
- State and local tax, if applicable. Nine states have no income tax; some cities have their own.
The 15.3% breaks down as 12.4% Social Security, which applies only up to the annual wage base, and 2.9% Medicare, which has no cap. An additional 0.9% Medicare surtax applies above $200,000 single or $250,000 married filing jointly.
Quarterly estimated payments
If you expect to owe $1,000 or more in tax, the IRS requires payment through the year rather than in one lump at filing. Deadlines fall on roughly 15 April, 15 June, 15 September and 15 January.
The most useful thing to know is the safe harbour. Pay either of these and you avoid the underpayment penalty regardless of what you eventually owe:
- 90% of the current year’s tax liability, or
- 100% of last year’s total tax, rising to 110% if your prior-year adjusted gross income exceeded $150,000.
The prior-year safe harbour is the practical one: it is a known number, so you can divide last year’s total tax by four and pay that, without forecasting an unpredictable freelance year. If you earn far more, you settle the difference in April with no penalty.
The software
Pricing is indicative for the 2026 filing season and changes as the deadline approaches; early filers usually pay less. Most advertised free tiers do not cover Schedule C.
FreeTaxUSA
Best value by a wide margin
Includes Schedule C and self-employment tax in the free federal return, with a low flat fee for each state return.
Price is the main distinction. Major brands charge $100–$130 for a self-employed federal return, while FreeTaxUSA includes Schedule C, self-employment tax, home office and depreciation at no federal cost. It is an IRS-authorized e-file provider and supports prior-year returns and amendments.
The trade-off is less guidance and polish. The interface is functional, accounting-software imports are not automatic, and support is more limited than with premium products. Those constraints matter less for someone who keeps clean books and understands the entries.
Strengths
- Schedule C and self-employment tax included free federally
- State returns around $15
- Handles home office, depreciation and multiple businesses
- Prior-year and amended returns supported
Trade-offs
- Plain interface with less guidance
- No automatic import from accounting tools
- Support is thinner than the premium brands
H&R Block Self-Employed
Best if you may want a human
Comparable capability to TurboTax at a slightly lower price, with the option of handing the return to an adviser in a physical office.
The retail office network is the main distinction. If a first S-corp year, an unexpected 1099-K or an unfamiliar state filing makes the return more complicated than expected, you can transfer the work to an adviser without starting again.
The software itself is capable and slightly cheaper than TurboTax, with generally less aggressive upselling. Neither is close to FreeTaxUSA on price.
Strengths
- In-person fallback at retail offices
- Cheaper than TurboTax for comparable capability
- Good import options and a clear interface
- Less aggressive upselling
Trade-offs
- Still expensive relative to budget options
- State returns extra
- Guidance marginally behind TurboTax
Keeper
Best for finding deductions during the year
Monitors your bank and card transactions year-round to identify deductible expenses, then files from what it has categorized.
Unrecorded deductible expenses can matter as much as errors on the return. Keeper monitors transactions through the year and asks about ambiguous charges while they are still familiar.
The subscription costs more over a year than a one-off filing product, so its value depends on finding deductions you would otherwise miss. Someone with clean books can spend less with FreeTaxUSA; someone without a bookkeeping routine may recover the subscription cost through better records.
Strengths
- Year-round deduction discovery rather than a March scramble
- Asks about transactions while you still remember them
- Filing included in the subscription
- Well-designed mobile workflow
Trade-offs
- Annual subscription cost exceeds one-off filing software
- Requires linking bank and card accounts
- Less suitable for complex returns
A CPA or enrolled agent
Worth it sooner than most freelancers think
An S-corp election, multi-state work, significant equipment or equity compensation can justify professional planning as well as return preparation.
Software applies rules to the information entered. A CPA or EA can advise on choices before filing: whether an S-corp election makes sense, how to set a reasonable salary, whether to expense or depreciate equipment, and how to handle work started in another state mid-year.
A professional can cover a $700 fee by identifying one structural change worth a few thousand dollars a year, though that outcome is not guaranteed. Look for someone who regularly serves self-employed clients because Schedule C planning experience varies among general preparers.
Strengths
- Planning advice, not just compliance
- Represents you in an audit
- Catches structural savings software cannot
- Reduces the filing work you handle yourself
Trade-offs
- Substantially more expensive than software
- Quality varies widely, so a referral matters
- Good preparers stop taking new clients in February
Deductions freelancers most often miss
- Home office. The simplified method is $5 per square foot up to 300 sq ft. The space must be used regularly and exclusively for business. A corner used only for work qualifies; the kitchen table does not.
- Health insurance premiums. Self-employed people can deduct premiums for themselves and family as an above-the-line deduction, subject to limits. Frequently missed and frequently large.
- Retirement contributions. A SEP-IRA or Solo 401(k) allows far higher contributions than a personal IRA. A Solo 401(k) in particular permits both employee and employer contributions, which can shelter a substantial share of profit.
- Half of self-employment tax, deducted against income tax automatically.
- Business mileage at the standard IRS rate, supported by a contemporaneous log. Reconstructing it after the fact does not satisfy an examiner.
- Software, subscriptions and professional development that relate to your work.
- The business portion of phone and internet. Use a reasonable, documented percentage rather than the whole bill.
When an S-corp starts to make sense
As a sole proprietor, all net profit is subject to the 15.3% self-employment tax. With an S-corporation election, you pay a reasonable W-2 salary that is subject to payroll taxes, while remaining profit can be taken as a distribution that is not.
The tax saving comes with additional costs. You take on payroll filings, a separate business return, and typically $1,500–$3,000 a year in accounting and payroll costs. The rough consensus is that it starts to pay above roughly $40,000–$60,000 of net profit, but the result depends on your state, salary level and circumstances.
The reasonable salary is the critical assumption. Setting it artificially low to minimize payroll tax is a known IRS examination area, and an adjustment can bring back taxes and penalties. Make this decision with a CPA rather than relying on a blog post, including this one.
Frequently asked questions
How much should I set aside for taxes as a freelancer?
25–35% of net profit is the common guidance, and it is a reasonable default. The floor is the 15.3% self-employment tax plus your income tax bracket, less the QBI deduction and business expenses. Higher earners in high-tax states should be at the top of that range or above it. Move it to a separate account on receipt of every payment.
Do I have to pay quarterly estimated taxes?
If you expect to owe $1,000 or more for the year, yes. Missing the deadlines produces an underpayment penalty calculated per quarter, so paying in full the following April does not avoid it. The prior-year safe harbour, paying 100% of last year’s total tax (110% above $150,000 AGI), is the simplest way to stay protected.
What is the cheapest tax software that handles Schedule C?
FreeTaxUSA includes Schedule C and self-employment tax free for federal, charging roughly $15 per state return. The major brands typically charge $85–$130 for the equivalent federal return. Note that the well-advertised "free" tiers from other providers generally exclude self-employment income entirely.
Can I deduct my home office?
If the space is used regularly and exclusively for business, yes. The simplified method is $5 per square foot up to 300 square feet, requiring no expense tracking. The actual-expense method can be worth more but needs records of rent or mortgage interest, utilities and the square-footage percentage.
Should I form an LLC or S-corp as a freelancer?
An LLC provides liability protection but no tax change by default; a single-member LLC is taxed as a sole proprietorship. An S-corp election can reduce self-employment tax, typically becoming worthwhile above roughly $40,000–$60,000 of net profit, but it adds payroll obligations and $1,500–$3,000 a year in professional costs. Model it with a CPA before electing.
What happens if a client does not send a 1099?
You still report the income. Clients only issue 1099-NEC forms above $600, and some fail to issue them at all, but the obligation to report is yours regardless. Payment platforms also issue 1099-K forms, which can overlap, so check that the same income is not counted twice.