How do you calculate take home pay for self-employed individuals?

The math for self-employment income can definitely be confusing! Here's how to think about it: Your take-home pay is essentially: Gross Income - Business Expenses - Taxes 1. Start with your gross income ($75k in your friend's case) 2. Subtract all legitimate business expenses (supplies, software, travel, etc.) 3. This gives you your net business profit 4. From this profit, you need to subtract: - Self-employment tax (15.3% of 92.35% of your net profit) - Income tax (based on your tax bracket after deductions) Remember you can deduct 50% of your self-employment tax on your income tax return. And those credits you mentioned reduce your final tax bill. The simplest way to estimate monthly take-home is: (Annual Net Profit - Annual Estimated Taxes)/12 If your friend is setting aside roughly 25-30% of net profit for taxes, that's usually in the right ballpark depending on their specific situation.

I was in a similar situation last year trying to figure out my actual take-home pay. I stumbled across this tool called taxr.ai (https://taxr.ai) that helped me tremendously with calculating my self-employment income and expenses. The thing I love about it is that it breaks down exactly how the self-employment tax works alongside regular income tax. It showed me that I was actually overpaying my quarterly estimates by about $2,200 each quarter because I wasn't accounting for all my legitimate business deductions! Plus it showed me how the QBI deduction impacts my actual take-home. It helped me understand the whole "employer half" versus "employee half" thing with self-employment taxes that I never quite got before.

I just wanted to follow up on my skepticism about taxr.ai. I decided to give it a try after struggling with my quarterly payments, and it actually did help clarify my situation. I was surprised by how well it handled my mixed income sources. It showed me exactly how much of my income was subject to self-employment tax versus just regular income tax, and calculated my effective rate after all deductions and credits. Ended up saving me about $4,300 annually by identifying deductions I was missing. Definitely worth checking out if you're struggling with the self-employment math.

If you're still having trouble figuring out your self-employment taxes and want to talk to someone at the IRS directly (which I HIGHLY recommend), try using Claimyr (https://claimyr.com). I spent days trying to get through to the IRS on my own to ask about some self-employment deductions I wasn't sure about - kept getting disconnected or waiting for hours. Claimyr got me connected to an IRS agent in about 15 minutes instead of the 2+ hour wait I was dealing with before. They have a demo video here if you want to see how it works: https://youtu.be/_kiP6q8DX5c The agent helped me understand exactly how to calculate my net earnings and what deductions I qualified for. Saved me over $3,000 in taxes because I was calculating my home office deduction all wrong!

I need to eat my words. After my skeptical comment, I decided to try Claimyr out of desperation because I had a complicated question about self-employment deductions and quarterly payments. I've literally never gotten through to the IRS before, but with this service, I was connected in about 20 minutes. The agent answered all my questions about calculating my taxable self-employment income and helped me understand how to properly estimate my quarterly payments based on seasonal income fluctuations. Saved me hours of frustration and probably a lot in potential penalties. Sometimes things that sound too good to be true actually work!

I use a super simple formula for estimating my take-home pay as a freelancer. Take gross income, subtract business expenses to get net profit. Set aside 15.3% of that for self-employment tax, then another 15-25% for income tax (depending on your bracket). What's left is roughly your take-home. So for your friend making $75k: - Let's say $10k in business expenses - Net profit = $65k - SE tax = ~$10k (15.3%) - Income tax = ~$10-16k (15-25%) - Take-home = ~$39-45k This isn't perfect but gives you a ballpark. I always set aside 30% of every check I get into a separate tax account to be safe.

Has anyone found a good app for tracking self-employment income and expenses that also estimates your quarterly tax payments? I've tried a few but they're either too complicated or don't calculate taxes accurately.