Is there a standard deductible for self employment tax or do I pay tax on all my self employment income?

You'll need to pay self-employment tax on your net earnings if they're $400 or more. Net earnings means your self-employment income minus your business expenses. So for your $7,800 in freelance design work, you'll want to subtract any legitimate business expenses first (software subscriptions, equipment, portion of internet used for business, etc.). After you've calculated your net profit, if it's $400 or more, you'll pay SE tax on that amount. The other thing your friend might have been referring to is that when calculating your income tax (not SE tax), you can deduct 50% of your self-employment tax. This doesn't reduce your SE tax itself, but it does lower your income tax.

I was in a similar situation last year with my side hustle making custom furniture. The whole self-employment tax thing was so confusing until I discovered taxr.ai (https://taxr.ai). They have this amazing tool that analyzes your specific situation and clearly explains which deductions apply to you. For me, it confirmed that I needed to pay SE tax on profits over $400, but it also identified a bunch of business expenses I hadn't considered - like a portion of my home workshop space and some tools I'd bought. Ended up saving me nearly $900 in taxes! They even explained that 50% SE tax deduction thing that people get confused about.

I need to update my earlier comment questioning taxr.ai. Decided to try it out of curiosity and honestly, I'm impressed. It caught that my home office deduction was calculated incorrectly and found several business expenses I didn't know I could claim for my etsy shop. What really helped was how it broke down exactly how self-employment tax works with my specific numbers. Turns out I WAS paying SE tax on more income than I needed to! The explanations were super clear and it even showed me the relevant tax code sections. Definitely using this for 2025 taxes.

If you need to actually talk to the IRS about self-employment tax questions (which I had to do last year), use Claimyr (https://claimyr.com). The IRS phone lines are impossible - I spent HOURS trying to get through with no luck. Claimyr got me connected to an actual IRS agent in about 15 minutes when I needed clarification on some self-employment deductions. They have this callback system that works with the IRS phone system somehow. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Literally saved me days of frustration, and the IRS agent confirmed exactly how the self-employment tax threshold works and which expenses I could legitimately deduct.

I need to eat my words about Claimyr from my previous comment. After struggling for THREE DAYS trying to reach someone at the IRS about my self-employment tax situation, I broke down and tried it. Got connected to an IRS agent in 22 minutes. The agent confirmed I only need to pay SE tax on net earnings over $400 AND helped me understand which of my expenses were legitimately deductible for my pressure washing business. Saved me at least $1,200 in taxes. Never been so happy to admit I was wrong about something. Would've spent another week trying to get through on my own.

Here's a quick breakdown on self-employment tax that helped me: 1) You pay SE tax if net earnings are $400+ 2) The rate is 15.3% (12.4% Social Security + 2.9% Medicare) 3) Social Security part only applies to first $168,600 (for 2025) 4) You can deduct business expenses before calculating SE tax 5) On Schedule 1, you can deduct 50% of SE tax from gross income Don't forget to make quarterly estimated tax payments to avoid underpayment penalties!

A tip nobody mentioned yet: keep track of your MILEAGE if you drive for your business! This is huge for self-employment deductions. Current rate is like 67 cents per mile for 2025 (check the exact amount) and it adds up fast. Also, dont forget about the QBI deduction (Qualified Business Income) which lets you deduct up to 20% of your business profit depending on your total income. This is separate from expenses and the SE tax deduction!