Reply to srz's comment can you please talk about the freelance loopholes

making 60k as a freelancer is not the same as making 60k as a w2 employee and I'm going to break down why. disclaimer: there are many other deductions you can take that I did not include. I'm strictly comparing based on deductions freelancers can take that w2 employees cannot. this is a simplified example for educational purposes. this is not tax advice!!!! for this example, I'm simply comparing two salaries. I'm not going to add anything about student loans, 401k contributions, HSA, commuter benefits, etc. so, let's say you make 60k and you're a w2 employee. your gross pay is 60k and you get a standard deduction of 15k. everybody, regardless of their income, regardless of if they are self-employed or a w2 employee, you get that 15k deduction. and this takes your taxable income down to 45k. that would actually push down to a lower tax bracket. now, with the freelancer, you still get that 60k. however, you get to deduct business expenses. a w2 employee does not. and people that know the legal loopholes in how to reduce their taxable income by as much as possible will often times choose self-employment because you can put down your car payment, gas, anything required to work, your home office, a percentage of your rent can go towards this, your utilities, phone bill, health insurance too. anything that is considered a business expense. we also have self-employment tax deduct. I'm not going to get too much into this because I think it will be confusing, but just know that is a deduction that you can have plus that typical standard deduction. this takes the freelancer's taxable income to about $3,587 compared to that $45,000. now, how does that impact taxes? so with the w2 employee, the federal income tax owed on 45k is roughly 5k plus social security and Medicare tax, roughly $4600. taxes owed, roughly $9600. now, with a freelancer, you pay self-employment taxes = net profit (20k) - (7.65% of 20k) = $18.6K* (not 20k) in taxable income. SE taxes (15.3%) = $2,800. federal taxes = net profit (20k) - SE tax deduction ($1413) - standard deduction (15k) = $3.6K in taxable income. federal taxes (3.6k falls in 10% tax bracket) = $360. you are paying that on the total tax after deductions. so on that $20k, you pay self-employment taxes, which is 15.3% of 20k, which is $2,800. but then you get to deduct half of that, which is $1413. plus your standard deduction of 15k. this takes the freelancer's taxable income to $3,587. and their federal income tax owed is roughly $360. SE tax: $2800. taxes owed: $3100. so, you are paying roughly $3100 as a freelancer making 60k for taxes compared to $9600. I try to explain this as best as I can, but this is one example of many. some people pay no taxes. so do with that information what you will.