Federal Self-Employment Tax

Every self-employed person in the U.S. pays self-employment tax on net earnings: 12.4% for Social Security (on the first $176,100 in 2025) and 2.9% for Medicare, with no cap. That’s 15.3% right off the top. If your net exceeds $200,000 ($250,000 married), an additional 0.9% Medicare surtax kicks in.

You get to deduct half the SE tax when calculating adjusted gross income, but the cash still leaves your account. A freelancer earning $100,000 net pays about $14,130 in SE tax alone — before income tax.

New York State Income Tax

New York’s state income tax is progressive, running from 4% to 10.9%. The top rate applies to taxable income above $25 million, but the 9.65% bracket hits at $1,077,550 for single filers. Most NYC freelancers earning between $80,000 and $215,000 sit in the 6.33% to 6.85% range.

Unlike some states, New York doesn’t have a separate self-employment tax. But the income tax itself is among the highest in the country, and it stacks on top of the federal SE tax in a way that catches first-time freelancers off guard.

NYC Resident Income Tax

Here’s the layer that makes New York City different from, say, Buffalo. NYC imposes its own income tax on residents at rates from 3.078% to 3.876%. If you live in any of the five boroughs, you pay it. There’s no avoiding it unless you move.

At $100,000 in taxable income, the NYC tax runs about $3,400. That’s $3,400 on top of state tax, on top of federal tax, on top of SE tax.

MCTMT — The Tax Nobody Mentions

The Metropolitan Commuter Transportation Mobility Tax applies to self-employed individuals with net earnings from self-employment allocated to the Metropolitan Commuter Transportation District (MCTD) — which includes all five NYC boroughs plus Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester counties.

The rate is 0.34% on net SE earnings above $50,000. It’s small in isolation, but it’s one more item on an already long list. You file it on Form MTA-6, and it’s due with your state return.

Combined Effective Rates for NYC Freelancers

Stack it all up. A single NYC freelancer with $150,000 in net self-employment income pays approximately:

• Federal income tax: ~$24,000 (effective ~16%)
• Self-employment tax: ~$21,200 (15.3% on 92.35% of net)
• New York State: ~$8,500 (effective ~5.7%)
• NYC resident tax: ~$4,800 (effective ~3.2%)
• MCTMT: ~$340

Total: roughly $58,840, or about 39.2% of gross earnings. At $250,000, the combined rate climbs above 43%. The person keeping the smallest percentage of each marginal dollar is not a hedge fund manager — it’s a freelance graphic designer in Brooklyn paying self-employment tax on every cent.

How to Reduce the Burden

The single most effective move for NYC freelancers earning $60,000+ net is electing S-corp status. When you operate as an S-corp, you pay yourself a reasonable salary and take the remaining profit as a distribution. SE tax only applies to the salary, not the distribution. On $150,000 net with a $75,000 salary, that saves roughly $5,700 in SE tax per year.

Other strategies that move the needle:

• Retirement plan contributions — a Solo 401(k) or SEP IRA reduces both federal and state taxable income
• Health insurance deduction — self-employed health premiums are deductible above the line
• Home office deduction — reduces your Schedule C net, which flows through to SE tax, state, and city
• Proper entity structuring — the right entity can change which taxes apply to which income

Moving to New Jersey or Connecticut does eliminate the NYC resident tax, but both states have their own income taxes, and the commute has a cost too. Some people do the math and move anyway. Others decide the city is worth the premium.