The Threshold for Self-Employment: How Much Do You Need to Make?

To start, there is no specific amount you need to make to be considered self-employed. Even if you generate $50 per month on your own, without an employer, you are self-employed.

Financial Independence and Self-Employment

However, if you want to make a living from your self-employment, the amount you need to earn can vary greatly. Financial independence depends on your personal budget and lifestyle. To determine how much you need, you should create a detailed monthly expenditure and income table. Start by listing your monthly expenses, including rent, mortgage, utilities, and other bills. Then, calculate your total monthly income from various sources. Subtract your expenses from your income. If you have any leftover, you're on the path to financial independence!

Once you're self-employed and earning enough to cover your living expenses, you can use any additional money to save, invest, or enjoy life. The key is to have leftover money after covering your basic needs, which can help you maintain a comfortable lifestyle.

Why The Amount Doesn't Matter

Income is subjective. Some self-employed individuals earn as little as $9,000, while others earn over $200,000 annually. Personally, I earned around $150,000 last year, and my wife earned around $15,000. The point is, you can be self-employed and make any amount of money, provided it covers your needs.

Self-Employment Tax and Net Income

Net income is crucial, especially when it comes to self-employment taxes. If your net income is $400 or more, you are required to file Form 1040 SE and pay the self-employment tax, which is 15.3%. This tax is the combined employee and employer share of Social Security taxes. Don't be misled by the tax requirements; they are separate from the self-employed status.

Not Just About Money

You don’t need to earn anything to be self-employed. Just posting on Quora for 20 hours a day can make you self-employed. The same applies to artists and authors who may take months or years to create a product but still count as self-employed.

The self-employment tax threshold exists for tax purposes but does not affect your self-employed status. Whether or not you pay self-employment taxes depends on your net income, not on whether you are self-employed or not.

For more information and resources, visit:

Wave Accounting's Guide to Self-Employment Taxes IRS Guide to Self-Employment Tax