How does the calculator work?
We use your personal tax information to determine your self-employment, federal, state, and local income tax withholding rates (the percentage of your net profits that are estimated to be owed in taxes).
Then, we use your project inputs to calculate your project’s net profit, and multiple your net profit by your tax withholding rate to determine your tax liability for the project as well as the amount that get to take home.
Income taxes are calculated using standard deductions (not itemized deductions). If you are able to deduct many more expenses, then it’s possible that your tax burden ends up being less than stated in the calculator. However, it’s better to be pleasantly surprised by having set aside too much for your tax burden than blindsided by a higher tax burden than expected.
How does w2 income affect freelance taxes?
If you have w2 income, then your income tax withholding rates will be higher for your freelance projects.
Why? Because any income taxes that are being withheld by your employer are based on the gross income that you’re being paid. Therefore, self-employed income that you make in addition to your w2 income will have a much higher marginal tax rate.
For example, if your w2 income is $50,000, your marginal tax rate is based on the $50,000 tax bracket. If you make $30,000 in self-employment income in addition to that, then that income is taxed at a higher marginal tax rate (from the $50,000 to $80,000 range).
How do you calculate the tax withholding rate?
The overall tax withholding rate is the sum of your self-employment tax withholding rate, federal income tax withholding rate, state income tax withholding rate, and local income tax withholding rate (if applicable).
How do you calculate self-employment tax withholding rates?
Self-employment taxes are easier to calculate than income taxes, and are based on your net profit.
92.35% of your net profit is your self-employment taxable amount, and self-employment taxes include Medicare taxes and Social Security taxes.
Medicare taxes are 2.9% of your self-employment taxable amount.
Social Security taxes are 12.4% of the first $127,200 of your self-employment taxable amount (in other words, Social Security taxes cannot exceed $14,567).
Your total self-employment tax liability is the sum of your Medicare and Social Security taxes. Then we divide that by your project net profit to determine your self-employment tax withholding rate
|Project Net Profit
|x Self-employment taxable amount rate||x 92.35%|
|= Self-employment taxable amount||= $1,847|
|Medicare Taxes (2.9%)||$53.57|
|+ Social Security taxes (12.4% for the first $127,200)||+$ 229.01|
|➗Project Net Profit||➗$2,000|
|Self-employment tax withholding rate||14.13%|
How do you calculate federal income tax withholding rates?
First, we calculate your Federal taxable income.
|Annual self-employment income
|+ W2 annual income||+ $40,000|
|= Gross Income||= $90,000|
|- Self-employment tax deduction (One-half of self-employment taxes)||-$5,652|
|= Adjustable Gross Income||= $74,348|
|- Standard deduction||- $6,350|
|- Personal exemptions (based on number of dependents and filing status)||- $8,100|
|= Federal Taxable income||= $59,898|
Then, we use your filing status and federal taxable income and federal income tax brackets to calculate your effective federal income tax rate, which is used as your federal income tax withholding rate.
How do you calculate state income tax withholding rates?
State income taxes are a little more complicated, since different states calculate state income taxes in different ways. The first step is to calculate state taxable income by subtracting your state’s standard deductions and personal exemptions (different based on state, filing statuses, and number of dependents) from your gross income.
Example for a California resident, filing independently, with 1 dependent:
|Annual Net Self-Employment income||$40,000|
|+W2 Income||+ $40,000|
|= Gross Income||= $80,000|
|- Standard Deduction||-$4,129|
|- Personal Exemptions||-$455|
|= State Taxable income||$75,416|
However, not all states calculate state income tax using state taxable income. Some calculate it based on your federal taxable income (Colorado, Illinois, and Indiana) or based on your Adjustable Gross Income (Michigan).
Then, we calculate your effective state income tax rate based on your state’s formula for income tax, whether that be a flat tax or tax brackets, and use that as your state income tax withholding rate.
No state income Tax
Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming
Arizona, Arkansas, California, Connecticut, Delaware, Georgia, Hawaii, Idaho, Iowa Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota, Mississippi, Missouri. Montana, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont, Virginia, West Virginia, Wisconsin, Washington D.C.
Flat percentage of federal taxable income
Colorado, Illinois, Indiana
flat percentage of state taxable income
Massachusetts, New Hampshire, North Carolina, Pennsylvania, Tennessee, Utah
Flat percentage of adjustable gross income
How do you calculate local income tax withholding rates?
Local income taxes vary depending on where you live. There are only 14 states with cities/localities that have local income taxes: including Alabama, Arkansas, Colorado, Delaware, Missouri, Indiana, Kentucky, Maryland, Michigan, New York, Oregon, Pennsylvania, Ohio, and Iowa.
If you don’t live in any of these states, you do not have any local income taxes.
States without local income taxes
Alaska, Arizona, California, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Washington D.C., West Virginia, Wisconsin, Wyoming
States with local income taxes in specific localities only
Alabama, Arkansas, Colorado, Delaware, Kentucky, Michigan, Missouri, New York, Oregon
States with local income taxes no matter where you live
Indiana, Iowa, Maryland, Ohio, Pennsylvania
Birmingham levies an income tax of 1% on earned income.
The following school districts assess an income tax equal to 10% of state income tax before tax credits.
Three cities impose flat taxes on compensation.
Aurora charges $2 per month on compensation over $250
Denver charges $5.75 per month on compensation over $500
Greenwood Village charges $4 per month on compensation over $250.
Wilmington has a flat 1.25% tax on gross income
All 92 counties in Indiana have an individual income tax on gross income.
666 school districts impose an income tax surcharge ranging from 1% to 20% of state income tax owed. We use the median of 10%. You can find more detailed information about which income tax surcharge applies to you here.
Eight cities in Kentucky levy income taxes on residents and nonresidents.
- Bowling Green 1.85%
- Covington 2.50%
- Florence 2%
- Lexington-Fayette 2.25%
- Louisville 2.20%
- Owensboro 1.33%
- Paducah 2%
- Richmond 2%
All 24 Maryland counties levy income taxes on residents and nonresidents. Tax rates range from 1.25% to 3.20%. Baltimore also has an income tax of 3.05%.
Several Michigan cities impose income taxes with rates ranging from 0.50% to 2.50%. Detroit’s income tax rate is 2.50% for residents and 1.25% for non-residents.
Battle Creek 1%
Big Rapids 1%
Muskegon Heights 1%
Port Huron 1%
Grand Rapids 1.50%
Highland Park 2%
Both Kansas City and St. Louis have an income tax of 1%.
Yonker's income tax rate is equal to 10% of your net (after credits) state income tax. We do not include credits in our calculations.
New York City income tax is calculated with tax brackets based on your New York State Taxable income and Filing status. You can claim income tax credits, but we don’t include that in our calculations.
235 cities and 331 villages in Ohio have an income tax. We use the median of 1.7% in our estimations
Two regions in Oregon levy Income taxes.
- The Tri-Met Transit District (includes Portland): 0.6318%
- Lane County Transit District (includes Eugene): 0.60%
Most municipalities in Pennsylvania assess an Earned Income Tax. The local Earned Income Tax is only assessed on earned income, like wages. Unearned income like interest and dividends are not taxed. Pennsylvania state law limits the Earned Income Tax to a maximum flat rate of 2%, but Home Rule cities like Philadelphia and Scranton are not subject to this maximum.
Cities with tax rates above 2% include:
- Philadelphia (3.98%)
- Pittsburgh (3%)
- Reading (2.70%)
- Scranton (3.40%)
- Wilkes-Barre (2.85%)
For the cities listed above, we calculate the exact local income tax. For all other localities, we assume a 2% income tax rate.