Employed and Freelancing
Tax Example: Employed Designer with Freelance Income (2024 Tax Year)
Income Overview
W-2 Employment Income: $50,000 (Full-time design job)
Freelance Income: $50,000 (Side design business)
Filing Status: Single
Total Gross Income: $100,000
W-2 Employment Income Analysis
Salary Details
Gross Salary: $50,000
Federal Income Tax Withheld: $4,200
Social Security Tax Withheld: $3,100 (6.2%)
Medicare Tax Withheld: $725 (1.45%)
Total Payroll Taxes Withheld: $8,025
Net Take-Home: ~$41,975
Freelance Business Income (Schedule C)
Freelance Revenue & Expenses
Gross Freelance Income: $50,000
Business Deductions
Software & Subscriptions: $2,000
Adobe Creative Cloud, Figma, project management tools
Equipment: $2,500
Laptop upgrade, monitor, drawing tablet, camera
Home Office Deduction: $1,500
300 sq ft × $5 (simplified method)
Professional Development: $800
Design courses, conferences, workshops
Marketing & Website: $600
Portfolio website, business cards, online ads
Internet & Phone (Business %): $720
60% business use of $1,200 annual cost
Transportation: $800
Client meetings, networking events (67¢/mile)
Professional Services: $400
Accounting software, legal consultations
Supplies & Materials: $300
Design materials, printing, shipping
Total Business Expenses: $9,620 Net Freelance Profit: $40,380 ($50,000 - $9,620)
Tax Calculations
Self-Employment Tax (Freelance Income Only)
Net Earnings Subject to SE Tax: $40,380 × 92.35% = $37,291
Self-Employment Tax: $37,291 × 15.3% = $5,705
Deductible Portion: $5,705 ÷ 2 = $2,853
Adjusted Gross Income (AGI)
W-2 Income: $50,000
Net Freelance Income: $40,380
Less: ½ of SE Tax: -$2,853
Adjusted Gross Income: $87,527
Qualified Business Income (QBI) Deduction
QBI Deduction: $40,380 × 20% = $8,076
AGI is below $197,300 threshold, so full deduction applies
Taxable Income
Adjusted Gross Income: $87,527
Less: Standard Deduction (2024): -$14,600
Less: QBI Deduction: -$8,076
Taxable Income: $64,851
Federal Income Tax Calculation
Using 2024 Tax Brackets:
10% on first $11,000: $1,100
12% on $11,001 to $44,725: $4,047
22% on $44,726 to $64,851: $4,428
Total Federal Income Tax: $9,575
Total Tax Liability & Payments
Tax Summary
Federal Income Tax
$9,575
Self-Employment Tax
$5,705
Total Federal Tax
$15,280
Tax Payments Made
W-2 Withholding
$4,200
Payroll Taxes (SS/Medicare)
$3,825*
Taxes Paid
$8,025
Note: Payroll taxes from W-2 job partially offset self-employment tax
Tax Due Analysis
Total Tax Owed: $15,280
Taxes Already Paid: $8,025
Additional Tax Due: $7,255
Quarterly Estimated Payment Strategy
Why Quarterly Payments Are Needed
Since the W-2 withholding doesn't cover the freelance tax liability, estimated payments should be made to avoid underpayment penalties.
Recommended Quarterly Payments
Freelance Tax Liability: ~$7,255
Quarterly Payment: $7,255 ÷ 4 = $1,814
2025 Due Dates
Q1: April 15, 2025
Q2: June 16, 2025
Q3: September 15, 2025
Q4: January 15, 2026
Tax Forms Required
Primary Forms
Form 1040: Individual Income Tax Return
Schedule C: Profit or Loss from Business (Freelance)
Schedule SE: Self-Employment Tax
W-2: From employer
1099-NEC: From freelance clients (if applicable)
Supporting Documents
Business expense receipts
Mileage logs
Home office records
Bank statements
Effective Tax Rates
W-2 Income
16.1% (includes payroll taxes)
Freelance Income
18.9% (after deductions)
Combined Effective Rate
15.3%
Key Tax Benefits
Business Deductions
Total Deductions: $9,620 (19.2% of gross freelance income)
Tax Savings: $9,620 × 22% = $2,116
QBI Deduction
Deduction Amount: $8,076
Tax Savings: $8,076 × 22% = $1,777
Total Tax Benefits from Freelancing
Combined Savings: $3,893
Without Deductions, Tax Would Be: $19,173 vs. $15,280 actual
Monthly Cash Flow Planning
Monthly Income
W-2 Take-Home: $3,498
Freelance (After Tax Set-Aside): $3,100*
Total Monthly Take-Home: $6,598
*Assuming 25% set aside for taxes and business expenses
Tax Savings Recommendations
Set Aside from Freelance: 25-30% of each payment
Monthly Tax Savings: $1,250 - $1,350
Annual Tax Fund: $15,000 - $16,200
Strategic Tax Planning Tips
Maximize Deductions
Track Everything: Use expense tracking apps
Separate Business/Personal: Maintain separate ac
Last updated