Filing Self-Employed Taxes: A First-Timer's Guide

Last updated March 21, 2025

Working for yourself can be beneficial for a number of reasons. It’s when tax time comes around that things can get tricky, because unlike employees who receive W-2s, taxes aren’t automatically deducted from your paychecks when you’re self-employed. While you should consult a tax advisor for the specifics, here are some things to consider as tax season gets underway.

How do you know if you’re technically self-employed or not? The IRS classifies self-employment through the following criteria:

• You carry on a trade or business as a sole proprietor or an independent contractor.
• You are a member of a partnership that carries on a trade business.
• You are otherwise in business for yourself (including a part-time business).

The window to file your taxes in 2025 extends from February 5 to April 15, 2025 for all taxpayers, whether self-employed or not. However, there are some important differences between filing taxes as a self-employed individual and a company-employed individual that you should be aware of before you begin the process.

Here’s what we’ll cover:

• Key Differences for Self-employed Taxpayers
• Ways to Save Money When Filing Taxes If You’re Self-employed
• Tax Checklist for Self-Employed Individuals
• Frequently-Asked Questions

Key Differences for Self-Employed Taxpayers

You’ll likely need to file an income tax return if your net earnings from self-employment were at least $400. You’ll also be required to pay a self-employment tax in addition to income tax. The self-employment tax rate is 15.3%. It’s important to note that this percentage breaks down into two elements: the social security tax (12.4%) and the Medicare tax (2.9%).

Before you file, you’ll also need to determine your specific tax rate, and whether your area has specific city taxes you’ll need to pay. To figure out your tax rate, you’ll first need to find your net profit or net loss from your business by subtracting qualified expenses from your income.

It’s important to note that typically, 92.35% of your net earnings are subject to self-employment tax. Once you calculate this portion of your own net earnings, you can then apply the 15.3% tax to this amount to get your self-employment tax total.

In order to file taxes when you’re self-employed, you’ll need to have a social security number (SSN) or, if you are a nonresident or resident alien, an individual tax identification number (ITIN). For certain types of businesses, you may need a tax ID number (also known as an Employer Identification Number). It’s free and easy to obtain one.

If you operate your business as a sole proprietor, you’ll need to use the Schedule C (Form 1040) to report your income and expenses and file your annual tax return.

Ways to Save Money When Filing Taxes If You’re Self-Employed

It might be possible to save money when filing taxes, but it’s important that you first understand the difference between tax deductions and tax credits to decide which applies to you.

A tax deduction is only able to lower your taxable income, as well as the tax rate that is used to calculate your tax, and this can lead to a more significant refund on your withholding.

A tax credit, on the other hand, actually decreases the amount of tax that you owe. So while you’ll also receive a larger refund on your withholding, you may also receive a refund without a withholding, depending on the particular credit.

These are some common deductions:

• If you recently started your own business, you may be able to deduct the startup expenses, like legal and marketing costs, from your tax bill. You can expect to deduct up to $5,000 in business startup costs and up to $5,000 in organizational costs, but only if your total startup costs are $50,000 or less. Start-up costs don’t include deductible interest, taxes, or research and experimental costs.
• If you use a vehicle to travel for specific job-related purposes, you may be able to deduct 67 cents per mile.
• If you have a dedicated home office, you may be able to deduct rent/mortgage, property tax, and utility costs based on square footage.
• If you use any specific supplies or equipment that are critical to your job functions, you might be able to deduct their costs.
• Even though you’re required to pay the full Social Security and Medicare tax, you may be able to write off half of this amount at the end of the year.
• If you pay health insurance premiums, you may be able to deduct these costs.

Tax Checklist for Self-Employed Individuals

Here’s a quick checklist to help you prepare to file your taxes for the first time as a self-employed individual.

Gather these items:

• Personal records (full legal names, SSNs, addresses, percent ownership, etc. for you and any other business owners)
• Your 2024 federal and state tax returns
• Your current financial statements and bookkeeping records
• Income records, including 1099 forms if applicable
• Estimated tax payments
• General ledger

Gather information about your possible deductions:

• Advertising and promotion
• Business insurance, loan interest, and bank fees
• Charitable contributions/donations
• Education expenses
• Equipment purchases
• Health care expenses
• Home office
• Internet and cell phone
• Legal and accounting fees
• Office supplies
• Qualified business income (QBI)
• Rent (for office space or equipment)
• Retirement plan contributions
• Taxes and licenses
• Travel vehicle (for business use only)

File your taxes:

• Tally your revenue, losses, deductions, and credits
• Determine your tax amount by applying the 15.3% self-employment tax rate to 92.35% of your net earnings
• Get a free Tax ID Number/EIN
• File your annual tax return using Schedule C (Form 1040)
  • File form 1120S for S-Corps
  • File appropriate form if LLC (form will depend on LLC type)
• If you run into any issues or have specific questions, consult a tax professional to help you or file on your behalf.

Frequently-Asked Questions

How do I file taxes if I’m self-employed?

To file taxes when you’re self-employed, you’ll first need to determine your specific tax rate by subtracting qualified expenses from your income to calculate your net profit or loss. You also need to check into any city-specific taxes you’ll be responsible for. You’ll also need to have a social security number (SSN) or an individual tax identification number (ITIN) if you’re a nonresident or resident alien.

How much money do you have to make self-employed to claim taxes?

In order to file taxes as a self-employed individual, you’ll need to have made at least $400 in 2024.

How much should I put away for taxes if I am self-employed?

The amount you should set aside for taxes will vary based on your income and tax bracket, but it’s generally recommended that you reserve anywhere from 20 to 35% of the income you plan to declare on your 1099 (after any deductions).

Can I get a tax refund if I’m self-employed?

Yes, it’s absolutely possible to receive a tax refund if you’re self-employed — and if you’re strategic about it, you can maximize your potential refund by claiming all deductions you’re eligible for, including those for your home office, internet expenses, and a vehicle you use for business purposes.

How do I report self-employment income without a 1099?

If you didn’t receive a 1099 form, but you still made at least $400 in income, you need to fill out Form 1040 Schedule C, where you’ll report your self-employment income and deductible business expenses.

Can I file my taxes without my 1099?

Yes — as mentioned above, you can file your taxes without a 1099 form by filling out the Form 1040 Schedule C.

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