Estimated tax and self-employment tax for makers

Handmade shop profit carries self-employment tax

If your shop is a business and its net profit reaches $400 for the year, you owe self-employment tax on that profit, on top of ordinary income tax.

Self-employment tax is how people who work for themselves pay Social Security and Medicare. An employee splits those taxes with an employer. A sole proprietor pays both halves, which is why the rate looks high to people seeing it for the first time.

The tax is figured on Schedule SE and applies to net profit from Schedule C, not to gross sales. Materials, platform fees, shipping and other business costs come off first. A shop that sold $9,000 but netted $2,500 pays self-employment tax on the $2,500 only.

$400You must file Schedule SE and pay self-employment tax if your net earnings from self-employment were $400 or more. — Internal Revenue Service, Publication 334, retrieved 2026-09-27

15.3%The self-employment tax rate is 15.3 percent, of which 12.4 percent is Social Security and 2.9 percent is Medicare. — Internal Revenue Service, retrieved 2026-09-27

When a handmade seller must make estimated payments

You generally need to make quarterly estimated payments if you expect to owe $1,000 or more in federal tax when you file, after withholding and credits.

Nobody withholds tax from marketplace payouts. That is the whole reason estimated payments exist for sellers. A maker with a day job may already have enough withheld from wages to cover a small shop's tax, and could raise that withholding instead of paying quarterly. A maker whose shop is the main income usually cannot.

The $1,000 figure is what you expect to owe on the whole return, not the shop alone. Combine the shop's income tax and self-employment tax with anything else you owe, then subtract what is already withheld. If the remainder is at least $1,000, plan on quarterly payments.

$1,000Individuals, including sole proprietors, generally must make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. — Internal Revenue Service, retrieved 2026-09-27

The four estimated tax due dates, and the periods they cover

Estimated payments are due April 15, June 15, September 15 and January 15 of the following year. The periods are uneven, so the second payment comes only two months after the first.

The uneven split matters for sellers with seasonal sales. Holiday orders in November and December fall into the last period, paid in January. Spring craft fairs fall into the first or second. If most of your profit arrives in one season, you can figure each payment on what you actually earned in that period rather than splitting the year evenly.

When a date lands on a weekend or holiday, the payment is on time if made on the next business day.

Apr 15, Jun 15, Sep 15, Jan 15The IRS lists estimated tax due dates of April 15, June 15, September 15 and January 15 of the following year. — Internal Revenue Service, retrieved 2026-09-27

How to figure and pay each quarterly amount

Use the Form 1040-ES worksheet to estimate the year's tax, then pay each quarter online, by phone, through the IRS app or by mailing a voucher.

The worksheet walks you through expected income, deductions, self-employment tax and credits. For a first year, when you have no history, your sales records so far are the best guide. Revisit the estimate each quarter. A slow spring or a strong holiday season can move it a long way.

Paying online through your IRS account is the simplest way to keep a record of what you paid and when. Those payments reappear on your annual return as credits against what you owe.

The IRS says to use Form 1040-ES to figure and pay estimated tax on income that is not subject to withholding, such as self-employment earnings. — Internal Revenue Service, retrieved 2026-09-27

Estimated tax can be paid by mail with Form 1040-ES, online, by phone, through the mobile app, or through an individual's online IRS account. — Internal Revenue Service, retrieved 2026-09-27

Deductions that lower the profit your tax is figured on

Every legitimate business cost lowers the profit that income tax and self-employment tax are both figured on. For makers working from home, the home office deduction is one of the most overlooked.

The simplified method allows $5 per square foot of home space used for business, up to 300 square feet, for a maximum of $1,500. The space must be used regularly and exclusively for the business. A dedicated studio corner or a spare room used only for making and packing can qualify. A kitchen table you also eat at does not.

Materials, packaging, shipping, platform fees and tools also come off. Track them from the first sale, as the hobby-or-business page explains, because deductions you cannot document are deductions you cannot claim.

$1,500The simplified home office method allows $5 per square foot of home used for business, up to 300 square feet, for a maximum deduction of $1,500. — Internal Revenue Service, retrieved 2026-09-27

Set aside tax from every payout before you spend it

Move a fixed share of each marketplace payout into a separate savings account the day it lands. When a quarterly date arrives, the money is already there.

The share depends on your bracket and your state, but self-employment tax alone carries a 15.3 percent rate before any income tax is added. Many small sellers who get into trouble with estimated tax did not misunderstand the rules. They spent the payouts and then had nothing left in April.

An LLC does not change any of this for a single owner, since its profit still carries self-employment tax on Schedule C. If you are weighing an S corporation election to reduce that tax, the entity comparison explains the trade-off, and the cost breakdown shows what the rest of the shop costs each year.

The IRS treats a single-member LLC as disregarded from its owner for income tax purposes unless it elects corporate treatment on Form 8832. — Internal Revenue Service, retrieved 2026-09-27

Questions