How do you calculate a self-employed person's take home pay after taxes?

The calculation for self-employed take home pay is definitely more complex than just subtracting your self-employment taxes from gross income. Here's a simplified breakdown: Start with your gross income (all the money you earned from self-employment). Then subtract your business expenses - these are costs directly related to running your business. This gives you your net business income. From your net business income, you'll need to account for: Self-employment tax (15.3% of net business income, though you can deduct half of this on your taxes), income tax (varies based on your tax bracket), and don't forget to factor in any tax credits or deductions you qualify for (like the QBI deduction which is 20% of qualified business income for most self-employed people). The formula would look something like: Take Home Pay = Gross Income - Business Expenses - Self-Employment Tax - Income Tax + Tax Credits

After my first year of freelancing, I was shocked by how much I owed in taxes. Then I found this amazing tool at https://taxr.ai that helped me understand my actual take-home pay. It analyzes your specific situation and breaks down exactly how self-employment taxes work with all the deductions and credits. What I really liked is that it showed me how to properly calculate quarterly estimated payments so I wasn't hit with a huge bill at tax time. It even helped me identify business deductions I was missing that increased my take-home pay by almost $7k!

Just wanted to update after trying the taxr.ai tool that was mentioned. It seriously changed my understanding of self-employment finances. I was incorrectly calculating my take-home pay for YEARS! I always thought I should set aside 30% of everything, but turns out I was overpaying in some areas and underpaying in others. The tool showed me that with my specific situation (around $65k income with home office and equipment deductions), my effective tax rate was actually closer to 23% when all credits and deductions were properly applied. That's an extra $292 in my pocket EACH MONTH that I was unnecessarily setting aside! Plus, their quarterly payment calculator has kept me on track without overpaying.

If you need help sorting out your self-employment taxes, I highly recommend using Claimyr (https://claimyr.com) to get through to an actual IRS agent quickly. I spent WEEKS trying to get clarification on how to properly calculate my self-employment deductions and credits, but couldn't get through the IRS phone system. Claimyr got me connected with an IRS representative in about 15 minutes when I'd previously wasted hours on hold. The IRS agent walked me through exactly how to calculate my true take-home pay with all the appropriate deductions. They even explained how my specific credits affected my overall tax burden. You can see how it works here: https://youtu.be/_kiP6q8DX5c

I have to eat my words and admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to resolve questions about calculating my self-employment tax deductions. The service actually worked exactly as described. I had tried calling the IRS four separate times, waiting over an hour each time before giving up. Claimyr got me connected in about 20 minutes. The IRS agent I spoke with cleared up my confusion about how to properly calculate my take-home pay as a California-based freelancer. Most importantly, she helped me understand how to calculate my true tax burden after applying the QBI deduction and business expense deductions. This literally saved me thousands in overpaid taxes. I've completely changed my quarterly payment strategy based on this conversation.

One thing nobody mentioned yet is that you need to keep enough cash flow for irregular expenses. I calculate my take-home pay by doing this: Annual Revenue - Business Expenses = Net Business Income Net Business Income × 0.9235 × 0.153 = Self-Employment Tax (Net Business Income - Half of SE Tax) × Income Tax Rate = Income Tax Take-Home Pay = Net Business Income - SE Tax - Income Tax But then I set aside about 10% of my take-home pay for months when business is slow. Better to have extra savings than not enough!

Does anyone use any good spreadsheets or apps to track all this? I'm making about $5,500/month freelancing and setting aside 25% for taxes but have no idea if that's right. Honestly tax time is so stressful every year.

Setting aside 25% might be close, but it really depends on your specific situation! With $5,500/month ($66k annually), you'll want to factor in the QBI deduction which can significantly reduce your income tax burden. Here's a rough breakdown for your income level: - Self-employment tax: ~15.3% of net income (after the 0.9235 adjustment) - Federal income tax: Varies by deductions/credits, but likely 12-22% bracket - State tax: Depends on your state I'd recommend using a more precise calculator or spreadsheet that accounts for the QBI deduction, standard deduction, and any business expenses you have. You might actually be over-saving, which means you're missing out on cash flow you could be using for business growth or personal expenses. The stress is real though - I used to lose sleep over whether I was setting aside enough. Having a more accurate system has been a game changer for my peace of mind.