How much is self-employment tax for independent contractors?

Self-employment tax for independent contractors is 15.3% on net business income, calculated on Schedule SE. This breaks down as: Social Security tax (12.4%) on the first $176,100 of net earnings for 2025, and Medicare tax (2.9%) on all net earnings with no cap. If net earnings exceed $200,000 ($250,000 married filing jointly), an additional 0.9% Medicare surtax applies. Important tax benefits: you can deduct half the self-employment tax (7.65%) as an above-the-line deduction on Form 1040, reducing your adjusted gross income. You only pay self-employment tax if net earnings exceed $400 for the year. Note: you pay 15.3% but only on 92.35% of your net income, as the IRS allows a 7.65% adjustment to match the employer portion.

When are quarterly estimated tax payments due for contractors?

Quarterly estimated tax payments are due four times per year: April 15 (for Q1 income: January-March), June 15 (for Q2 income: April-May), September 15 (for Q3 income: June-August), and January 15 of the following year (for Q4 income: September-December). You must make estimated payments if you expect to owe more than $1,000 in federal taxes including self-employment tax. Use Form 1040-ES to calculate and submit payments. Missing deadlines triggers penalty interest. Most contractor accounting software includes quarterly tax reminders and calculations based on your year-to-date income. As a general rule, set aside 25-30% of each payment for taxes to ensure you have funds available for quarterly payments.

What expenses can independent contractors deduct on Schedule C?

Independent contractors can deduct all ordinary and necessary business expenses on Schedule C. Common deductible expenses include: Home office (simplified method: $5/sq ft up to 300 sq ft = $1,500 max, or actual expenses), Vehicle expenses (70 cents/mile for 2025 or actual costs), Office supplies and equipment, Software subscriptions (accounting, design, project management), Professional services (legal, accounting, consulting), Marketing and advertising, Business insurance, Phone and internet (business portion), Travel expenses (airfare, hotels, meals at 50%), Education and training related to your work, Bank fees and payment processing costs, and Retirement contributions (SEP-IRA up to $69,000 in 2025). Keep receipts for all deductions—accounting software with receipt capture helps maintain documentation for potential audits.

What is the best free accounting software for contractors?

Wave is the best free accounting software for independent contractors in the US and Canada. The free plan includes: double-entry accounting, unlimited invoicing with payment reminders, unlimited bank and credit card connections for automatic transaction import, expense tracking, and financial reports (profit & loss, balance sheet). Wave also offers free receipt scanning via mobile app. Limitations of Wave free: no mobile accounting app (only invoicing and receipt apps), email-only customer support, no native time tracking, no mileage tracking, and unavailable outside North America. For contractors needing more features, Wave Pro ($16/month) adds automatic receipt capture. If you need time tracking and mileage, consider FreshBooks Lite ($21/month) or QuickBooks Self-Employed ($20/month).

How do I track 1099 income from multiple clients?

Track 1099 income from multiple clients by setting up your accounting software with separate income categories or client tags. Best practices: Create a client list in your accounting software (QuickBooks, FreshBooks, Wave), Connect your business bank account for automatic transaction import, Categorize each deposit by client name, Send invoices through the software so payments auto-reconcile, and Generate year-end reports by client. Clients who paid you $600 or more must send Form 1099-NEC by January 31st. However, you must report ALL income on Schedule C, even amounts under $600 that don't generate a 1099. Your accounting software should show total income by client to reconcile against 1099s received. Discrepancies between your records and 1099s can trigger IRS inquiries.

Can contractors claim the home office deduction?

Yes, independent contractors can claim the home office deduction if they use part of their home "regularly and exclusively" as their principal place of business. Two calculation methods are available: Simplified Method—$5 per square foot of home used for business, maximum 300 square feet ($1,500 max deduction). No depreciation calculations required. Regular Method—Calculate actual expenses (mortgage interest/rent, utilities, insurance, repairs, depreciation) and allocate based on percentage of home used for business. For example, if your home office is 200 sq ft and your home is 2,000 sq ft, you can deduct 10% of qualifying expenses. Important: W-2 employees cannot claim the home office deduction through 2025 under current tax law. Only self-employed individuals, including contractors, qualify.

What features should contractor accounting software have?

Essential contractor accounting software features include: Schedule C Expense Categories (automatic categorization matching IRS expense lines), Self-Employment Tax Calculator (estimates 15.3% SE tax on net profit), Quarterly Estimated Tax Reminders (deadlines: April 15, June 15, September 15, January 15), Mileage Tracking (automatic GPS tracking at 70 cents/mile for 2025), Receipt Capture (photograph and store receipts for expense documentation), Invoicing (professional invoices with payment tracking and reminders), Time Tracking (for billing hourly clients), Bank Connection (automatic import and categorization of transactions), 1099 Income Tracking (by client for year-end reconciliation), and Profit & Loss Reports (track business performance). Nice-to-have features: project profitability tracking, proposal/estimate creation, and integration with tax software like TurboTax. Prioritize tax-focused features since contractor accounting revolves around Schedule C compliance.

1099 & Self-Employment Guide

Best Contractor Accounting Software 2025

Compare accounting software for independent contractors. 1099 income tracking, Schedule C expense categorization, self-employment tax calculation, and quarterly estimated payments.

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15.3%

Self-Employment Tax

70¢

Mileage Rate 2025

$176,100

SS Wage Base 2025

25-30%

Tax Reserve Target

Contractor Accounting Software Comparison 2025

Compare features for 1099 income tracking, Schedule C categorization, and self-employment tax

Software	Price	Best For
QuickBooks Self-Employed	$20/month	Tax-focused solo contractors
QuickBooks Online	$35/month	Growing contractor businesses
FreshBooks	$21/month	Service-based contractors
Wave	Free	Budget-conscious contractors
Zera Books	$79/month	Bank statement processing

Self-Employment Tax Breakdown (2025)

Independent contractors pay self-employment tax on net business income. You pay both the employer and employee portions of Social Security and Medicare.

Component	Rate	Cap	Note
Social Security	12.4%	$176,100 (2025)	Wage base limit
Medicare	2.9%	No cap	All net earnings
Additional Medicare	0.9%	>$200K single	High earners only
Total SE Tax	15.3%	Up to wage base	On 92.35% of net

Tax Tip: You can deduct half of your self-employment tax (7.65%) as an above-the-line deduction on Form 1040, reducing your adjusted gross income. The IRS allows you to calculate SE tax on 92.35% of net income to match the employer adjustment.

Quarterly Estimated Tax Deadlines

Contractors must make quarterly estimated tax payments if you expect to owe more than $1,000 in federal taxes. Use Form 1040-ES to calculate and submit payments.

Q1April 15

Income earned:

January - March

Due: April 15, 2025

Q2June 15

Income earned:

April - May

Due: June 16, 2025

Q3September 15

Income earned:

June - August

Due: September 15, 2025

Q4January 15

Income earned:

September - December

Due: January 15, 2026

Pro Tip: Set aside 25-30% of each client payment into a separate savings account for taxes. This ensures you have funds ready for quarterly payments and avoids underpayment penalties.

Top Schedule C Deductions for Contractors

Maximize your deductions by tracking these common contractor expenses. Your accounting software should categorize these automatically for Schedule C reporting.

Home Office

Line 30

$5/sq ft (max 300 sq ft) or actual expenses

Vehicle Expenses

Line 9

70¢/mile (2025) or actual costs

Business Insurance

Line 15

Liability, E&O, professional

Office Supplies

Line 18

Paper, ink, postage, software

Professional Services

Line 17

Legal, accounting, consulting

Marketing

Line 8

Advertising, website, business cards

Home Office Simplified Method

Deduct $5 per square foot of home used for business, up to 300 square feet = $1,500 maximum deduction. No complex calculations or depreciation tracking required.

Retirement Contributions

SEP-IRA contributions up to $69,000 in 2025 (or 25% of net self-employment income). Reduces taxable income and builds retirement savings.

Tracking 1099 Income

Clients who pay you $600 or more must send Form 1099-NEC by January 31st. Track all income by client to reconcile against 1099s received.

ABC Marketing Agency1099 received

$24,500

XYZ Tech Solutions1099 received

$18,200

Smith Consulting1099 pending

$12,800

Johnson LLC1099 received

$8,400

Various Small (<$600)No 1099 required

$2,150

Total 1099 Income$66,050

1099 Reconciliation Tips

Track Income by Client

Tag every payment with client name for year-end reports

Watch for January Deadline

Clients must mail 1099-NEC by January 31st

Report All Income

Include amounts under $600 even without a 1099

Reconcile Records

Match 1099s to your books; report discrepancies

Contractor Accounting Software FAQ

Common questions about 1099 income, self-employment tax, and contractor bookkeeping

Contractor accounting software is financial management software designed for independent contractors, freelancers, and self-employed professionals who receive 1099-NEC income rather than W-2 wages. Unlike employee accounting, contractor software handles unique requirements: Schedule C (Profit or Loss from Business) expense tracking, self-employment tax calculation (15.3% for Social Security and Medicare), quarterly estimated tax payment reminders, 1099-NEC income tracking from multiple clients, and deductible business expense categorization. Popular options include QuickBooks Self-Employed ($20/month), FreshBooks ($21/month), and Wave (free). The software helps contractors maximize deductions and simplify tax filing since business income flows through personal tax returns via Schedule C.

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