Self assessment tax is the process where self-employed individuals, freelancers, and independent contractors calculate and pay their own taxes. Unlike W-2 employees whose taxes are withheld, self-employed workers must estimate and pay taxes quarterly, including both income tax and self-employment tax (Social Security + Medicare).

Self-employment tax is 15.3% of net self-employment earnings: 12.4% for Social Security (up to $174,900 wage base in 2026) and 2.9% for Medicare (no cap). An additional 0.9% Medicare surtax applies to income over $200,000 (single) or $250,000 (MFJ). The tax is calculated on 92.35% of net earnings.

For 2026, quarterly payments are due: Q1 - April 15, 2026; Q2 - June 15, 2026; Q3 - September 15, 2026; Q4 - January 15, 2027. Pay via IRS Direct Pay or EFTPS.

Common deductions include: home office ($5/sq ft simplified), vehicle (70¢/mile est. for 2026), equipment, supplies, software, advertising, professional services, insurance, phone/internet, travel, meals (50%), continuing education, and retirement contributions (SEP-IRA, Solo 401(k)).

The Section 199A Qualified Business Income deduction allows self-employed individuals to deduct up to 20% of their net business income. Phase-outs apply for specified service businesses (consulting, health, law, accounting) when taxable income exceeds thresholds (~$191,950 single / ~$383,900 MFJ for 2026).

Yes, if you expect to owe $1,000+ in taxes after subtracting withholding and credits. To avoid penalties, pay either 100% of prior year's tax liability or 90% of current year's tax in quarterly installments. High earners ($150K+ AGI) must pay 110% of prior year tax.

Gig workers (Uber, DoorDash, Instacart, etc.) file Schedule C with Form 1040. You'll receive 1099-K or 1099-NEC forms. Track all income and deductible expenses (mileage, phone, supplies). Make quarterly estimated payments and pay SE tax on net earnings.

Yes, self-employed individuals can deduct 100% of health insurance premiums for themselves, spouse, and dependents as an above-the-line deduction. This reduces both income tax and the base for calculating QBI deduction. The deduction cannot exceed your net self-employment income.

SEP-IRA: up to 25% of net SE income (max $70,000 for 2026). Solo 401(k): $23,500 employee + 25% employer contribution. SIMPLE IRA: $16,500 + match. Contributions reduce taxable income and grow tax-deferred. Deadline to establish: year-end (401k) or tax filing date (SEP).

The underpayment penalty is calculated at the federal short-term rate plus 3% (compounded daily). For 2026, expect ~8% annually. Penalty applies to each quarter's underpayment from due date until paid. Avoid by paying 100% of prior year tax or 90% of current year tax.