Updated for Individual U.S. Taxpayers — IRS Schedule C, Schedule SE, and Publication 334 Guidance
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Introduction: Why Self-Employment Tax Matters in 2025
If you’re a freelancer, gig worker, or run your own small business, your income is considered self-employment income. Unlike employees, you must pay both income tax and self-employment (SE) tax to cover Social Security and Medicare. In 2025, IRS Schedule C and Schedule SE remain the cornerstone of self-employed tax reporting, guided by IRS Publication 334 (Tax Guide for Small Business).
Schedule C: Reporting Business Income & Expenses
Schedule C is used to report profit or loss from your business. It covers gross receipts, deductible expenses, cost of goods sold, and net income. If your net earnings are $400 or more, you must file Schedule C and pay SE tax.
- Gross Income: All revenue earned from your trade or business.
- Deductions: Expenses like supplies, office costs, travel, advertising, and home office deduction.
- Net Profit: Income after expenses, which flows to Form 1040 and Schedule SE.
Schedule SE: Calculating Self-Employment Tax
The IRS requires self-employed individuals to pay 15.3% SE tax on net earnings:
- 12.4% Social Security Tax (applies up to $168,600 in 2025 earnings).
- 2.9% Medicare Tax (applies to all net earnings).
- 0.9% Additional Medicare Tax for individuals earning over $200,000.
You can deduct half of the SE tax (the employer portion) on your Form 1040 to reduce taxable income.
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Who Must File Schedule SE?
You must file Schedule SE if you meet any of these conditions:
- You have net earnings of $400 or more from self-employment.
- You are a church employee with income over $108.28.
- You are a partner in a business reporting distributive shares of income subject to SE tax.
Even if you have W-2 wages, your self-employment income must be reported separately.
IRS Publication 334: Small Business Tax Guide
Publication 334 provides self-employed taxpayers with IRS-approved explanations on deductions, recordkeeping, estimated tax, and reporting rules. It’s the go-to reference for sole proprietors, independent contractors, and gig workers in 2025.
Practical Example
Jane is a freelance graphic designer who earned $80,000 in 2025. She deducts $20,000 in expenses, leaving $60,000 net profit. On Schedule C, she reports her business income and deductions. On Schedule SE, she pays SE tax of approximately $9,180 (12.4% Social Security up to the limit + 2.9% Medicare).
Tax Planning Tips for Self-Employed Individuals in 2025
- Track business expenses with digital tools to maximize deductions.
- Make quarterly estimated tax payments to avoid IRS penalties.
- Consider a SEP IRA, Solo 401(k), or SIMPLE IRA for retirement savings and tax deductions.
- Use IRS-approved mileage rates for business vehicle deductions.
Conclusion
For individual taxpayers in the USA, self-employment in 2025 means careful reporting on Schedule C and Schedule SE, plus compliance with IRS rules from Publication 334. By tracking expenses, paying quarterly estimates, and using available deductions, you can reduce your tax liability and stay in good standing with the IRS.
