Over 73 million Americans work as freelancers or independent contractors. The financial life of a freelancer is fundamentally different from a W-2 employee — more control, more complexity, and more responsibility. This guide covers the essentials.
Retirement accounts for the self-employed
| Account | 2026 limit | Best for | Notes |
|---|---|---|---|
| SEP-IRA | Up to 25% of net SE income or $69,000 | High earners, simple setup | Employer contributions only |
| Solo 401(k) | $23,500 employee + 25% employer = up to $69,000 | Maximizing contributions | More admin, but much higher limits |
| SIMPLE IRA | $16,500 | Small businesses with employees | Less relevant for solo freelancers |
| Traditional/Roth IRA | $7,000 | Additional savings | Income limits for Roth |
Health insurance for freelancers
Without employer-sponsored health insurance, freelancers have two main paths:
- ACA Marketplace (healthcare.gov): Premium subsidies available if income is under 400% of the federal poverty level. Self-employed people may qualify for significant subsidies by managing taxable income carefully.
- Spouse's employer plan: If your spouse has employer coverage, adding yourself is almost always cheaper than marketplace coverage.
The LLC question
Most freelancers don't need an LLC immediately. The liability protection matters if you have significant assets at risk. The tax benefits depend on income level — S-corp election on an LLC makes sense at roughly $80,000+ in net profit annually. At lower income levels, a sole proprietorship is simpler and has similar tax treatment.
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