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Self-Employment Taxes in NY: A Complete Guide

Tax TeamNovember 28, 202410 min read

Self-Employment Taxes: The Basics

If you're a freelancer, gig worker, or independent contractor in New York, you face a more complex tax situation than traditional employees. You're responsible for paying both the employer AND employee portions of payroll taxes.

The Self-Employment Tax Breakdown

As a self-employed individual, you pay:

TaxRateNotes
Social Security
12.4%
On first $168,600 of net earnings
Medicare
2.9%
On all net earnings
Additional Medicare
0.9%
On earnings over $200,000 (single)
**Total SE Tax**
**15.3%**
Up to Social Security cap

Plus, you still owe:

  • Federal income tax (10% - 37%)
  • NY State income tax (4% - 10.9%)
  • NYC tax if applicable (3.078% - 3.876%)

    • Calculating Your Self-Employment Income

    Your self-employment tax is calculated on net self-employment income, which is:

    Gross Revenue - Business Expenses = Net Self-Employment Income

    Then, you calculate SE tax on 92.35% of that net income (the IRS adjustment).

    Example: NYC Freelancer Earning $100,000

    Let's break down the taxes for a single NYC freelancer with $100,000 in net self-employment income:

    Tax TypeAmount
    Self-Employment Tax (15.3% × 92.35%)
    $14,130
    Federal Income Tax (after SE deduction)
    $11,767
    NY State Income Tax
    $4,522
    NYC Income Tax
    $3,246
    **Total Taxes**
    **$33,665**
    **Effective Rate**
    **33.7%**

    Compare this to a W-2 employee at $100,000 who pays ~$29,884 in total taxes (29.9%). The difference is about $3,800.

    The Self-Employment Tax Deduction

    You can deduct the employer-equivalent portion (half) of your self-employment tax from your income. This reduces your adjusted gross income for federal tax purposes.

    For our $100,000 freelancer, this deduction is about $7,065, which saves approximately $1,500 in income taxes.

    Quarterly Estimated Tax Payments

    Self-employed individuals must make quarterly estimated tax payments. Due dates for 2024-2025:

    PeriodDue Date
    Q1 2024 (Jan-Mar)April 15, 2024
    Q2 2024 (Apr-May)June 17, 2024
    Q3 2024 (Jun-Aug)September 16, 2024
    Q4 2024 (Sep-Dec)January 15, 2025

    Penalty Warning: If you don't pay enough estimated taxes throughout the year, you may face underpayment penalties.

    Essential Deductions for Self-Employed NYers

    Business Expenses

  • Home office (dedicated space)
  • Equipment and supplies
  • Software subscriptions
  • Professional development
  • Business travel
  • Marketing and advertising
  • Professional services (accounting, legal)

    • Health Insurance

    Self-employed individuals can deduct 100% of health insurance premiums paid for themselves and their families.

    Retirement Contributions

  • SEP-IRA: Up to 25% of net earnings (max $69,000)
  • Solo 401(k): Up to $23,000 employee + 25% employer contribution
  • SIMPLE IRA: Up to $16,000

    • NY-Specific Deductions

  • NY 529 Plan contributions ($5,000/$10,000 married)

    • S-Corporation Election: Is It Worth It?

    Many self-employed individuals form S-corps to reduce self-employment taxes. Here's how it works:

    Without S-Corp (Schedule C):

  • All $100,000 subject to 15.3% SE tax
  • SE tax: ~$14,130

    • With S-Corp:

  • Pay yourself a "reasonable salary" of $60,000
  • Remaining $40,000 taken as distribution (no SE tax)
  • SE tax on $60,000: ~$9,180
  • Savings: ~$4,950

    • However, S-corps have costs:

  • Formation and maintenance fees
  • Payroll processing ($500-2,000/year)
  • Additional tax returns

    • Generally, the break-even point is around $50,000-75,000 in net income.

    NYC Freelancer Specifics

    If you're self-employed in NYC:

  • You owe NYC income tax on all income
  • The Unincorporated Business Tax (UBT) may apply if net income exceeds $95,000
  • UBT rate is 4% with various deductions

    • Tips for Managing Self-Employment Taxes

  • Set aside 30-35% of income for taxes
  • Track expenses religiously - Use apps like QuickBooks or FreshBooks
  • Make quarterly payments - Avoid penalties
  • Maximize retirement contributions - Reduce taxable income significantly
  • Consider an S-corp if earning over $75K consistently
  • Work with a CPA - The complexity often justifies professional help

    • Calculate Your Self-Employment Taxes

    Use our NY tax calculator with the self-employment option to estimate your quarterly payments and total tax burden.

    Calculate Your NY Taxes

    Use our free calculator to see your exact tax breakdown