Taxes for freelancers and the self-employed in the US in 2025

This guide explains what you need to know about taxes for self-employed workers and freelancers in the US. It covers key topics such as tax rates, registration requirements, allowable deductions, and compliance rules. You’ll also learn how understanding tax allowances and choosing the right tax structure can support your business success – plus how Wise Business can help you manage international payments and tax transfers more easily.

The tax system for freelancers and self-employed workers in the US

If you work as a freelancer or are self-employed in the US, you must pay income tax and self-employment tax if your annual net earnings are more than $400. You’re responsible for reporting your income to the Internal Revenue Service (IRS) each year by filing an annual tax return – usually due on April 15. You’ll also need to make quarterly estimated tax payments throughout the year.

In addition to federal taxes, you may have to pay state or local income taxes on your self-employed income, depending on where you live and work.

The amount of tax you owe depends on factors such as your total earnings, location, residency status, and the legal structure of your business. Because US tax rules can be complex – especially for international freelancers who may have to file taxes in more than one country – it can be helpful to seek professional tax advice.

What taxes do freelancers have to pay in the US?

If you’re self-employed or freelancing in the US, you’re generally responsible for paying the following taxes:

• Income tax: You must pay federal income tax on business profits at progressive rates, depending on your income level. Most states – and some cities – also charge their own income tax.
• Self-employment tax: This covers Social Security and Medicare contributions, similar to the payroll taxes that employees and employers share.
• Sales tax (if applicable): This applies mainly to the sale of goods and, in some states, certain services. The tax is collected from customers and then sent to the state or local tax authority, usually on a monthly or quarterly basis. Not all freelancers need to collect sales tax – it depends on what you sell and where your clients are located.

If you run a business or trade in the US, you’ll generally pay taxes as a self-employed individual if you’re a:

• Sole proprietor
• Freelancer/independent contractor
• Member of an unincorporated partnership
• Member of a Limited Liability Company (LLC), unless the LLC has elected to be taxed as a corporation
• Gig worker

For these types of work, business income is treated as personal income. If you’re in a partnership, each partner reports their share of the profits on their own tax return.

This differs from corporations, which generally pay corporate income tax on business profits separately, while employees have their taxes withheld from their paychecks through payroll withholding.

If you are a US citizen living and working overseas, you still need to file a US tax return every year. You might also owe US tax on your earnings, depending on your total income and whether your country of residence has a tax treaty with the US.

Income tax for freelancers in the US

If you’re self-employed in the US, you must file a federal tax return and pay income tax if your net earnings are more than $400 a year.

US citizens and tax residents (those who meet the substantial presence test) must report and pay US tax on their worldwide income. Non-residents only pay US tax on income earned within the US.

When you file your federal tax return, you’ll include your self-employment income along with any other personal income (such as wages, interest, or dividends). The 2025 rates for individuals filing single are:

Income	Tax rate
$0 – $11,925	10%
$11,926 – $48,475	12%
$48,476 – $103,350	22%
$103,351 – $197,300	24%
$197,301 – $250,525	32%
$250,526 – $626,350	35%
Above $626,350	37%

Different income brackets apply for married couples (filing jointly or separately) and heads of household.

In addition to federal tax, most states and some cities charge their own income taxes. State income taxes vary from about 1% to 13.3% in 2025. City taxes are usually low (under 1%), except in New York City, which has higher local rates.

How to register as freelancer for taxes in the US

If you’re a US resident and self-employed, you’ll usually pay taxes using your Social Security Number (SSN).

If you’re a non-resident or foreign national without US work authorization – such as a remote worker living abroad – you’ll need an Individual Taxpayer Identification Number (ITIN) instead.

You don’t have to register separately as a freelancer. When you report self-employment income on your tax return, the IRS automatically considers you a sole proprietor for tax purposes.

You’ll need an Employer Identification Number (EIN) if you:

• Hire employees
• Operate as a partnership
• Run an LLC that requires one

LLCs must also register their business with the state, file Articles of Organization, and usually open a business bank account.

If you operate under a name different from your own, you may need to register a “Doing Business As” (DBA) (Doing Business As) name with your state or local government. Depending on your profession and location, you may need a business license or permit. Check your state and local regulations for details.

If you’re an international freelancer working with clients in more than one country, you may have to report income to multiple tax authorities. In these cases, you might need to provide proof of foreign income.

Wise Business account statements can serve as clear documentation of international business transactions and can be accessed digitally within minutes. You can receive international payments from clients in 20+ currencies. Payments are made using the mid-market rate with no hidden costs, meaning more income in your account.

Tax deductions and credits for freelancers in the US

You can lower your freelance tax bill in the US by claiming allowable deductions and credits. Deductions reduce your taxable income (the amount of income you pay tax on) whereas reduce your tax owed directly.

Here is an overview of how they work. You can also check the IRS website for further information.

Deductions: expenses and allowances

You can usually deduct ordinary and necessary expenses related to running your business. Example include:

• Home office costs, if you run your business primarily from home.
• Business use of your vehicle, either at the standard rate of $0.70/mile (2025) or actual expenses such as fuel and maintenance.
• Phone and internet costs, if used for business.
• Office supplies and materials, like stationery or software.
• Travel and lodging for business trips.
• Business meals, up to 50% of qualifying costs.
• Professional fees and memberships.
• 50% of your self-employment tax.
• Depreciation of business equipment and other long-term assets.
• Qualified business income (QBI) deduction if eligible – up to 20% of qualifying income.

Examples of expenses you cannot deduct are:

• Personal or non-business expenses.
• Commuting costs (travel to and from a regular workplace).
• Fines or penalties.
• Full cost of large equipment in one year (must use depreciation or Section 179 rules).
• Entertainment costs.

You can itemize deductions or take the standard deduction on your personal tax return. The standard deduction for 2024 is $14,600 for single filers. This simplifies your filing – you don’t need to list individual personal deductions. However, business deductions (like home office or mileage) are claimed separately, even if you take the standard deduction.

You should keep receipts and records of all business expenses for at least three years, in case the IRS asks for verification.

Home office deduction

You can claim the home office deduction if you use part of your home regularly and exclusively for business, and it’s your principal place of business.

Two calculation methods are available:

• Simplified method: $5 per square foot of home used for business, up to a maximum of 300 sq. ft. (maximum $1,500).
• Regular method: Deduct the business-use percentage of home expenses such as rent or mortgage interest, utilities, insurance, and repairs.

Tax credits

Credits reduce your tax owned dollar-for-dollar. Some are refundable (you can get money back even if you owe no tax), and others are non-refundable (can only reduce your bill to zero).

Common credits for freelancers and self-employed individuals include:

• Earned Income Tax Credit (ETIC): For low- to moderate-income earners
• Premium Tax Credit: Helps cover the cost of health insurance from the Health Insurance Marketplace.
• Foreign Tax Credit or Foreign Earned Income Exclusion: To avoid double taxation on income earned abroad.
• Education Credits: For job-related education or courses
• Retirement Savings Contribution Credits: If you contribute to a qualified retirement plan.

Other business tax credits may apply depending on your industry or activities.

How to file self-employed tax returns in the US

The US tax year runs from January 1 to December 31. Most individual tax returns are due by April 15 of the following year. You can request an extension to file until October 15, but any taxes owed are still due by the April deadline.

If you’re self-employed, you’ll file your personal tax return using Form 1040, and include the following forms as needed:

• Schedule C (Form 1040) – reports your business profits and loss
• Schedule SE (Form 1040) – calculates your self-employment tax
• Form 1099 – if you made or received certain payments within the tax year
• Form 1065 – used only if your business operates as a partnership

If you have set up your business as an LLC, you’ll fill in forms as either a sole proprietor (single member LLC) or partnership (multi-member LLC). If your LLC has elected to be taxed as a corporation (C Corp or S Corp), the business files its own return, and you report any wages or dividends you receive on your personal tax return – but you don’t file self-employment forms.

You can file your tax return in several ways:

• Online using a free IRS filing system
• By mail, using paper forms downloaded from the IRS website
• Through a professional tax preparer or IRS-approved e-file provider

Tax payments

If you expect to owe $1,000 or more in taxes for the year, you’ll need to make quarterly estimated tax payments. These are generally due on or around the 15th of April, June, September, and January.

Use Form 1040-ES to calculate and pay your estimated taxes. Non-residents use Form 1040-ES (NR). The IRS website lists several payment options, including online payments and direct bank transfers.

If you’re an international freelancer earning income from clients outside the US, you must still report that income on your US tax return. You can use Wise Business account statements as documentation of international income and transactions. These electronic statements can be submitted as supporting records if requested by the IRS.

Self-employment tax in the US

Self-employment tax covers your Social Security and Medicare contributions. It’s similar to the payroll taxes that employees pay through salary deductions.

You must pay self-employment tax if your net earnings from self-employment are $400 or more in a year. This applies to most freelancers, independent contractors, and small business owners.

The current rate is 15.3% of your net income, which includes:

• 12.4% for Social Security (old-age, survivors, and disability insurance) on the first $168,600 of net earnings in 2024
• 2.9% for Medicare (hospital insurance) on all net earnings
• An additional 0.9% Medicare tax on net earnings over $200,000 (or $250,000 for married couples filing jointly) in 2024

Whereas employers and employees normally split payroll taxes evenly, with each paying 7.65%, self-employed workers pay both portions themselves. However, they can deduct half (7.65%) when calculating their income on their tax return.

You need to report your net earnings and calculate your self-employment tax through Schedule SE (Form 1040) when filing your annual tax return. You may also need to make quarterly estimated tax payments throughout the year if you expect to owe more than $1,000 in total tax.

Non-residents who earn income from self-employment in the US may be subject to self-employment tax. However, if their home country has a Totalization Agreement (a Social Security treaty) with the US, and they’re already contributing to their home country’s system, they may be exempt.

Sales tax obligations for self-employed workers

Sales tax is the main form of consumption tax in the US, similar to VAT in many countries. It’s set and collected by state and local governments. Customers pay sales tax at the point of sale, but businesses are responsible for collecting, reporting, and sending (remitting) the taxes to the appropriate state or local authority.

Sales tax rules vary by state and locally. Currently, 45 states and Washington DC impose a statewide sales tax. Some cities and counties also add local taxes on top of the state rate.

If you’re self-employed and sell taxable goods or services in a state that has sales tax, you may need to register with that state’s Department of Revenue if you meet either of the following conditions:

• You have a physical presence in the state (such as an office, store, or warehouse), or
• You meet an economic nexus threshold, meaning you exceed a certain level of sales or transactions in that state — typically around $100,000 in sales or 200 transactions per year.

Combined sales tax rates (state plus local) vary widely, from about 1.82% in Alaska—which has no state sales tax but allows local ones—to 9.56% in Louisiana, the highest in the country.

If your business has sales tax obligations, you’ll need to get a permit from your state’s Department of Revenue, collect taxes from your customers through sales, file returns, and remit payments to the tax authority according to your assigned schedule (e.g. monthly, quarterly, or annually).

Corporate tax considerations

If you set your business up as a corporation, you may have to pay corporate income tax. A corporation is a separate legal entity, meaning it pays its own taxes on business profits. Individuals who work for the corporation are taxed as employees, not as self-employed workers.

The most common corporate form in the US is the C Corporation (C Corp). These are often larger businesses with several employees, but self-employed people or small partnerships can choose this structure. Many do this by forming an LLC and electing to have it taxed as a C Corp. In this setup, you become an employee of your own company rather than being self-employed.

Resident US corporations pay corporate income tax on their worldwide profits. Foreign corporations with US branches or subsidiaries are taxed only on their US-sourced income.

As of 2025, the federal corporate tax rate is 21%. In addition, 44 states and Washington DC apply separate corporate income taxes. These typically range between 1% and 10%. The highest rate in 2025 is in New Jersey, where businesses with a net income of over $10 million pay 11.5%.

Corporations can usually deduct their ordinary business expenses and may qualify for various business tax credits depending on their industry and activities.

S Corps

Another option is the S Corporation (or S Corp). Like a C Corp, it is a separate legal entity with employees, but it is treated differently for tax purposes. An S Corp is a pass-through entity, meaning profits and losses “pass through” to the owners (shareholders), who report them on their personal tax returns. As a result, S Corps do not pay corporate income tax.

If you are self-employed, you can choose to operate as an S Corp. You must pay yourself a “reasonable salary” as an employee, which is subject to regular income and payroll taxes. Any remaining profits can then be distributed to you as a shareholder. These shareholder distributions are not subject to self-employment tax, which can reduce your overall tax burden.

To qualify for S Corp status, a business must:

• Be a U.S.-based corporation,
• Have no more than 100 shareholders, and
• Not be a type of company that’s ineligible (for example, certain banks or insurance companies).

Tax penalties and compliance in the US

You may face a fine or penalty if you don’t:

• File your tax return on time
• Pay your tax bill by the deadline
• Provide accurate and complete information on your return

If you fail to file your federal tax return on time, the standard penalty is 5% of the unpaid tax for each month (or part of a month) your return is late, up to a maximum of 25%. Rates are different for partnerships and S Corps.

Failure to provide an accurate information return on time can result in a fine of between $60 and $680 (2026).

The standard failure-to-pay penalty is 0.5% of the unpaid tax for each month (or part of a month) the payment is late, also capped at 25%. This includes non-payment or underpayment of estimated taxes.

If you provide incorrect or incomplete information that results in underpayment of tax, the IRS may charge an accuracy-related penalty equal to 20% of the amount underpaid.

Interest also accrues on any unpaid tax and penalties until they’re fully paid.

Penalties for late filing or payment of state and local taxes vary. Check with the relevant state or local tax authority for specific rules and rates.

Repeated failure to comply with US tax laws can result in tax fraud charges, with penalties including large fines or imprisonment for serious cases. You can consult a US tax professional if you are unsure about how to file your returns correctly or feel that you need guidance. If you have difficulty making tax payments on time, contact the IRS or your state tax authority as soon as possible.

Finding professional help in the US

If you’re unsure about anything related to freelance or self-employed taxes in the US, it can be helpful to get advice from a qualified tax professional. This might be useful when filing your tax return, choosing a business structure, or simply making sure you’re meeting all your tax obligations.

You can get help in several ways, including tax preparation, tax advice, and accounting services. The IRS also provides free assistance tools, including free filing software available to eligible taxpayers.

There are several online platforms that you can use, including:

• FreeTaxUSA
• H&R Block
• TurboTax

If you prefer to work with a professional, you can search certified tax experts through:

• IRS Directory of Federal Tax Return Preparers
• National Association of Enrolled Agents (NAEA)
• National Association of Tax Professionals (NATP)

Keep in mind that registered professionals usually charge a fee for their services. It’s worth comparing prices and checking that your chosen preparer has experience with freelance or self-employed taxes before hiring them.

International considerations for expat freelancers

If you’re an expat working as a freelancer or self-employed professional in the US, you may have tax obligations both in the US and your home country. The exact rules depend on where you live, your citizenship, your home country’s tax laws, and how much you earn.

Many expats must report income to more than one tax authority. To avoid paying tax twice on the same income, check whether your home country has a tax treaty or social security agreement with the US. These agreements often help prevent double taxation. If your country doesn’t have one, you may still qualify for foreign tax credits or exclusions to reduce your US tax bill.

Because international tax rules can be complex, it’s often a good idea to seek advice from a qualified tax professional who specializes in expat taxation.

You can open up a Wise Business account to help you manage your international tax affairs. Register an account for free and access all available services for a one-time fee. You can then send, receive, and hold funds in a range of currencies. International transfers use the mid-market exchange rate, with no hidden fees.

Important business terms and phrases glossary for the US

Local term	Description
Income tax	The primary tax levied on individual earnings and profits
Self-employment tax	Additional tax paid by freelancers and independent contractors for social security/pension contributions
Sales tax	Consumption tax added to goods and services at each stage of production/distribution
Tax return	Official document filed annually declaring income, expenses, and tax liability
Tax deduction	Business expenses that can be subtracted from gross income to reduce taxable amount
Invoice	Formal bill sent to clients requesting payment for services rendered
Independent contractor	Legal classification for freelancers who work for clients but are not employees
Filing deadline	Official due date by which tax returns must be submitted to authorities
Tax identification number	Unique number assigned by tax authorities for identification purposes
Home office deduction	Tax benefit allowing freelancers to deduct portion of home expenses used for work
Internal Revenue Service (IRS)	Government agency responsible for collecting taxes and enforcing tax laws

Conclusion

Working as a freelancer or self-employed person in the US means you’re responsible for managing your own taxes. This includes filing annual tax returns and making regular payments for federal income tax, self-employment tax, and any state or local taxes that apply.

If you’re an expat, you may also need to stay up to date with tax obligations in your home country, especially if you must report income there as well.

While taxes can be complicated, this guide should help make things clearer. You can always find more information on the IRS website or get advice from a qualified tax professional.

If you work with clients and receive payments internationally, tools like a Wise Business account can make managing your finances easier. You can open an account for free, pay a small one-time setup fee to access all services, and hold, send, and receive money in multiple currencies. International transfers use the mid-market exchange rate with low, transparent fees.

Self-imployed taxes in the US FAQs

Do freelancers pay tax in the US?

Yes, freelancers in the US with net annual earnings over $400 must pay income tax and self-employment tax.

What is a freelance tax code in the US?

Resident freelancers in the US file and pay taxes using their Social Security Number (SSN). Non-resident freelancers and those without US work authorization need to apply for an Individual Taxpayer Identification Number (ITIN).

Do I need to register as a freelancer in the US?

No, you don’t need to register as a freelancer. The IRS will automatically consider you a sole proprietor if you report self-employment income on your tax return. You will need to register with your state authority if you set up a Limited Liability Company (LLC).

Can I be self-employed and employed in the US?

Yes, you can be self-employed in the US as well as working as an employee. However, you will need to report income from all sources on your annual tax return to make sure that you pay the correct taxes.

Can I freelance in the US with a student visa?

No, you generally can’t freelance or work in a self-employed capacity on a student (F-1) visa. You can only work legally through approved programs like on-campus jobs, or work programs relating to your field of study. To freelance freely or run your own business, you’d need to change to a different visa type.

Useful resources

• Internal Revenue Service (IRS) – federal US tax authority
• IRS self-employed individuals tax center
• IRS small business and self-employed tax center
• Social Securities Administration (SSA) – apply for your social security number (SSN)
• Apply for an Individual Taxpayer Identification Number (ITIN)
• List of state government websites
• IRS Directory of Federal Tax Return Preparers
• National Association of Enrolled Agents (NAEA)
• National Association of Tax Professionals (NATP)
• Small Business Administration (SBA) – supports small businesses in the US