How much tax do independent contractors pay in Arizona?
Independent contractors in Arizona typically pay between 25% and 35% of their net income in total taxes, depending on how much they earn. That includes federal self-employment tax, federal income tax, and Arizona state tax.
Self-employment tax takes the biggest bite. You pay 15.3% on your net self-employment income, covering both Social Security (12.4%) and Medicare (2.9%). W-2 employees split these taxes with their employer, but as a contractor you pay both halves yourself. The Social Security portion only applies up to $176,100 in 2025, but Medicare has no cap.
Federal income tax adds to the total based on your taxable income after deductions. Most contractors fall into the 12%, 22%, or 24% brackets. You can deduct half of your self-employment tax from your income, which helps reduce what you owe. Business expenses like equipment, supplies, mileage, and home office costs lower your taxable income further.
Arizona keeps state income tax simple with a flat 2.5% rate on taxable income. Unlike some states, Arizona cities don’t add local income taxes on top of state tax. If you’re comparing Arizona to other states, the tax burden here is relatively low on the state side.
Add these together and a contractor earning $60,000 in net profit might owe around $9,200 in self-employment tax, $5,000 to $7,000 in federal income tax, and $1,200 to $1,500 in Arizona tax. That’s roughly $15,000 to $18,000 total, or about 25% to 30% of net income. A Phoenix area business accountant can help you calculate your specific liability based on your situation.
The IRS expects you to pay as you go. If you’ll owe $1,000 or more when you file, you need to make quarterly estimated payments in April, June, September, and January. Miss these and you’ll face underpayment penalties on top of your tax bill.
Most contractors set aside 25% to 30% of each payment they receive for taxes. Some open a separate savings account just for this so the money is there when quarterly payments come due. It’s much easier than scrambling to find $5,000 four times a year.
The estimates above are just starting points. Your actual liability depends on deductions, filing status, other income sources, and retirement contributions. Proper tax preparation ensures you claim every deduction you’re entitled to and pay exactly what you owe.
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