Tax Simulation Challenge

Hustle Logic // Lesson 03

Entity Status

Individual / 1099 Freelancer

Total Annual Revenue

Successfully earned from freelancing this year

$ 12,000

Phase 1: Deducting Expenses

List your likely annual business expenses to find your Taxable Profit. (IRS only taxes what's left after business costs).

Software (Adobe/SaaS) $ 600

Marketing/Website $ 300

Equipment/Supplies $ 500

Total Expenses $ ________

Adjusted Taxable Profit

$ ________

(Revenue - Expenses)

Phase 2: The 15.3% "Double" Tax

This is your Social Security and Medicare contribution. As a freelancer, you pay both halves.

Self-Employment Tax Liability

(Taxable Profit * 0.153)

$ ________

Phase 3: Estimated Income Tax (10%)

Assuming a standard undergraduate income level, estimate 10% for Federal Income Tax on your profit.

Estimated Fed Income Tax $ ________

THE ACTUAL TAKE-HOME

Gross Revenue $ 12,000

Total Taxes Due ($ ________)

Total Expenses ($ ________)

True Net Savings

$ ________

"The real money in your pocket."

Strategic Reflection: Was the time you spent earning that $12,000 worth the actual take-home amount? Calculate your "Tax-Adjusted Hourly Wage" (Net Savings / Hours Worked). Is it still higher than a campus job?

Legal Structure Decision

Option A: Sole Prop

Choose if your venture is low-risk (e.g., tutoring, consulting) and you have zero assets to protect.

Option B: LLC

Choose if you are hiring others, have significant personal savings, or work in high-risk fields (e.g., construction, manufacturing).

The Tax Trap

Tax Trap Slides

Tax Simulation Worksheet