Everything You Need to Know About Self-Employment Taxes in Florida
Sole proprietors, freelancers, independent contractors, and one-person LLCs in the Sunshine State are subject to a variety of taxes, including Florida state taxes and federal taxes. If you have earned income as a self-employed individual or through a side hustle in addition to your regular job, understanding your tax obligations as a self-employed person in Florida will help you to calculate and pay taxes correctly.
There Is No Florida Self-Employment Tax
What is most commonly known as the self-employment tax is due to the IRS—not to the state of Florida. The state of Florida doesn't charge an income tax or self-employment taxes on sole proprietor or freelance income unless you’re classified as a C corporation.
As of April 2022, the federal self-employment tax rate is 15.3% of your net earnings (earnings minus business expenses). This tax comprises a 12.4% Social Security tax and a 2.9% Medicare tax.
If you earn $200,000 or above in self-employment income (or $250,000 for married couples filing jointly), there is an additional Medicare tax of 0.9%. Social Security tax is only charged on the first $147,000 of your income for 2022.
Why Self-Employed People Pay Higher Federal Taxes
Self-employed individuals who have filed taxes before as employees will notice that the self-employment tax is twice the 7.65% rate of Social Security and Medicare taxes that an employee is required to pay.
While it might seem unfair, there's a good reason for this. When you're an employee, your employer pays half of your Social Security and Medicare contributions and you pay the other half. However, when you're self-employed, you are both the employer and employee and have to pay both halves.
The good news about the federal self-employment tax, however, is that you can claim half of the amount (what would have been the employer’s contribution) as a tax deduction on your federal income tax.
How to Calculate the Self-Employment Tax
People who earn $400 in self-employment income or $108.28 from church employee income during a tax year have to pay the federal self-employment tax. Check out our comprehensive guide about how to calculate your quarterly tax obligations.
You will calculate your net earnings using Schedule C and your self-employment tax liability on Schedule SE when you fill out your IRS tax return using Form 1040.
Please note: For the purposes of the federal self-employment tax, only include income that you earned actively by providing goods and services to others. While passive income from rental properties and investments is taxed as income by the IRS, this income is not subject to self-employment tax.
Calculate Self-Employment Tax on Net Income under $147,000
To estimate how much you owe, you can use a self-employment tax calculator or calculate the amount yourself:
Add up your gross self-employment income for the tax year.
Subtract your business expenses.
Multiply this by 0.153 to get your self-employment tax amount.
For example, Jo made a net income of $100,000 installing swimming pools in Jacksonville, Florida:
Multiply 100,000 by 0.153 = 15,300
Jo’s self-employment tax will be $15,300.
Calculate Self-Employment Tax on Net Income above $147,000 but below $200,000
Add up your gross self-employment income for the tax year.
Subtract your business expenses.
Multiply your net income up to $147,000 by 12.4% to get the Social Security tax amount.
Multiply your net income by 2.9% to get the Medicare tax amount.
Add the two amounts together to get your self-employment tax total.
Maria made $170,000 after expenses renting out condos in Miami:
Multiply 147,000 by 0.124 = 18,228 Social Security tax
Multiply 170,000 by 0.029 = 4,930 Medicare tax
Add together 18,228 and 4,930 = 23,158
Maria’s self-employment tax for the year will be $23,158.
Calculate Self-Employment Tax on Net Income Above $200,000 or $250,000 for Married Couples Filing Jointly
Add up your gross self-employment income for the tax year.
Subtract your business expenses.
Multiply your net earnings up to $147,000 by 12.4% to get the Social Security tax amount.
Multiply your net earnings up to $200,000 (or $250,000) by 2.9% to get the initial Medicare tax amount.
Multiple your net earnings over $200,000 (or $250,000) by 3.8% to get the additional Medicare tax amount.
Add the three amounts together to get your self-employment tax total.
Bob and Suzy had a great year and made $300,000 after expenses selling a proprietary software program (married filing jointly):
Multiply 147,000 by 0.124 = $18,228 Social Security tax
Multiply 250,000 by 0.029 = $7,250 Medicare tax at 2.9%
Multiply 50,000 by 0.038 = $1,900 Medicare tax at 3.8%
Add 18,228+ 7,250 + 1,900 = $27,378
Bob and Suzy’s self-employment tax for the year will be $27,378.
Net Income vs. Adjusted Gross Income
When calculating your Social Security and Medicare taxes, it's important to recognize that these taxes are calculated using a different base to your federal income taxes:
The federal self-employment tax is calculated as a percentage of your net income, which is gross income minus business expenses.
Federal income tax is calculated as a percentage of your taxable income, which is your adjusted gross income (gross income minus business expenses, student loan repayments, and other expenses) minus tax deductions.
First, you will calculate your self-employment income. Then, you will calculate your taxable income. Remember to subtract half of your self-employment tax amount as a deduction when you calculate your taxable income for the purpose of paying federal income tax.
How to Pay Self-Employment Tax
There are three ways to pay self-employment taxes:
Online
By phone
By mail
Self-employed people who expect to owe less than $1,000 in federal taxes for the fiscal year can simply pay the full amount of self-employment tax for the year when they file their tax returns. However, if you expect to owe more than $1,000 in tax for the year, you will need to pay estimated taxes.
The deadlines for paying quarterly taxes are:
April 15 for earnings in the period January 1 to March 31.
June 15 for earnings in the period April 1 to May 31.
September 15 for earnings in the period June 1 to August 31.
January 15 for earnings in the period September 1 to December 31.
You can use IRS Form 1040-ES to calculate your quarterly estimated taxes.
Other Relevant Taxes for Self-Employed People
While there isn't a dedicated Florida self-employment tax, freelancers and sole proprietors still need to meet their other Florida state tax and federal income tax obligations.
Florida State Taxes
Sales and Use Tax
Sole proprietors, freelancers, and independent contractors must collect and pay Florida sales tax on the goods and services that they offer. Sales tax is not collectible on tax-exempt goods and services. Use tax is due on purchases both inside and outside of Florida for which a 6% sales tax (or above) was not paid at the time of purchase.
The standard sales tax rate for Florida is 6% at the state level plus local taxes that range between 0% and 1.5%. There are slightly different sales tax rates for electricity, amusement machines, leases, and commercial real property licenses. In Florida, sales tax must be paid monthly to the Florida Department of Revenue between the 1st and 20th of the month following a sale.
Excise Tax
If your self-employment income involves the sale of fuel, cell phones, alcohol, or cigarettes, you will need to charge and pay excise taxes at the relevant rates. Generally, excise taxes aren't relevant to freelance or contractor income because the items to which they apply are heavily regulated and require special licenses to sell.
Florida Corporate Income Tax
Corporations in Florida pay taxes on their profit for the privilege of existing and trading as a business entity. Sole proprietor LLCs may be eligible for this tax as well, so it's essential to talk to a Florida small business accountant to find out what your obligations are.
Federal Income Tax
Federal income tax is calculated and paid on your federal income tax return. As mentioned, the amount is calculated as a percentage of your adjusted gross income (AGI) minus eligible deductions. Many sole proprietors, small business owners, freelancers, and contractors are eligible for the qualified business income deduction, which can reduce your tax liability considerably. For all business deductions claimed, make sure you have receipts to back up your claims.
Don't Guess, Get Help
Calculating your self-employed taxes in Florida can quickly get complicated, and the consequences of underpaying can be severe.
Before accepting freelance work (or after you've received freelance income for a couple of months), it's a good idea to see a small business accountant and find out exactly what you need to pay and the due date for making your payment. It's far better to invest a small amount in professional tax planning now than to wait until tax return time and not have enough money to settle the debt.
