Render therefore unto Caesar the things which are Caesar's; and unto God the things that are God's. (KJV). Jesus answers a political trap by treating tax owed to a pagan empire as payable; he is not endorsing Rome's policies, and not offering an exemption either.
Matthew 22:21Gains are not wages
The tax code treats money you earn and money your assets earn as two different things. Ordinary income (wages, self-employment profit, interest, rent, most retirement withdrawals) is taxed on the bracket schedule from why taxes exist. Capital gains get their own, generally lower schedule of 0%, 15%, or 20%, with thresholds the IRS updates annually. Three definitions do most of the work:
- Cost basis: what you paid, adjusted. “Generally, an asset’s basis is its cost to the owner,” with different rules for gifts and inheritances (IRS Topic 409). Gain equals sale price minus basis, so a lost basis record means an overstated gain and an overpaid tax. Keep records; brokers report basis for most recently bought shares, but not all.
- Holding period: “if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term” (IRS Topic 409). Short-term gains are taxed as ordinary income. One extra day of patience can beat a year of clever trading.
- Losses: offset gains first; beyond that you may deduct up to the lesser of $3,000 ($1,500 if married filing separately) against other income per year, carrying the rest forward indefinitely (IRS Topic 409). More on this in tax-aware investing.
Self-employment tax: you pay both halves
This is the number that ambushes new freelancers. An employee splits FICA with an employer. Working for yourself, you are both.
The self-employment tax rate is 15.3%: “12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare” (IRS). That is the same combined rate an employee and employer split 6.2%/1.45% each, described in your paycheck and withholding. You are simply paying both sides of it. It applies on top of income tax, and starts early: you owe it once net earnings from self-employment reach $400. The Social Security portion applies only up to an annual wage base that changes every year (that lesson carries the current one); the Medicare portion has no cap, and an extra 0.9% applies above certain income levels; read the current figures on the IRS page rather than any article.
One partial consolation: “You can deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income” (IRS), which reduces income tax only, not the self-employment tax itself. A common rule of thumb: set aside roughly a quarter to a third of net profit for taxes from the first dollar, rather than discovering the bill in April.
Quarterly estimates
There is no employer withholding from self-employment income, so the government asks for payment as you go. Individuals must generally make estimated payments if they expect to owe $1,000 or more when filing; the year is divided into four payment periods, each with its own due date (IRS). Miss them and you can owe a penalty even if you pay the full balance in April.
The safe harbor removes the guesswork: you generally avoid the penalty if you pay at least “90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller” (IRS), with a higher prior-year percentage for higher-income taxpayers (IRS Publication 505). Last year’s total tax, divided by four, paid on time, is the simplest route.
Real deductions versus schemes
A legitimate business deduction is an ordinary and necessary cost of doing business, actually incurred, and documented. The home office deduction is a good test case: genuinely valuable and widely abused. It requires that you “regularly use part of your home exclusively for conducting business,” and that the home be your principal place of business (IRS). Exclusively means exclusively: the dining table where the family also eats does not qualify. It is claimed on Form 8829, or under a simplified option at a set rate per square foot up to 300 square feet. Note carefully: employees are not eligible; it is for the self-employed (IRS).
Then there is the other category. The IRS publishes a “Dirty Dozen” list every year because the same schemes recirculate: fabricated credits promoted on social media, invented business losses, inflated charitable valuations, preparers who promise outsized refunds and then decline to sign. Two facts from that guidance are worth holding onto: a preparer who will not sign or supply a PTIN is a red flag, and you are legally responsible for what is on your return even if someone else prepared it.
“Render therefore unto Caesar the things which are Caesar’s” (Matthew 22:21, KJV) cuts both ways. Jesus does not soften what is owed to a government he was not defending. He also does not ask for more than is owed: claiming a deduction the law plainly grants is not cheating, and refusing one is not piety. The test is factual: did this expense actually happen, for this business, as described?
When a professional earns their fee
Free filing help is enough for a simple return. Some situations reliably cost more in mistakes than a preparer charges: a first year of self-employment, rental property, equity compensation, multi-state income, an entity change, an inheritance, or a year with large capital gains. “In the multitude of counsellors there is safety” (Proverbs 11:14, KJV). Ask any prospective preparer three questions: What are your credentials? Will you sign the return and give your PTIN? What is the total fee, in dollars? This is general education, not tax advice for your situation.
Before you go
Check yourself
1What is cost basis, and when is a gain taxed as ordinary income?
Basis is generally what you paid for an asset, adjusted, with different rules for gifts and inheritances. Gain is the sale price minus basis, so a lost record overstates your gain and the tax. Held more than one year, a gain is long-term and taxed at 0%, 15%, or 20% depending on income; held one year or less, it is short-term and taxed as ordinary income. Losses offset gains first, then up to $3,000 ($1,500 if married filing separately) of other income each year, with the rest carried forward.
2What is the self-employment tax rate, when does it start, and how do you avoid an estimated-tax penalty?
The rate is 15.3%, which is 12.4% for Social Security and 2.9% for Medicare, both halves of FICA, owed once net earnings reach $400. The Social Security part stops at the annual wage base ($184,500 for 2026); the Medicare part has no cap, and an extra 0.9% applies to earnings above $250,000 for married filing jointly, $125,000 for married filing separately, and $200,000 for everyone else. You may deduct the employer-equivalent half against income tax, not against the self-employment tax. Estimated payments are generally required if you expect to owe $1,000 or more. You generally avoid the penalty by paying at least 90% of this year's tax or 100% of last year's (a higher percentage applies at higher incomes), in four on-time payments.
3You work at the kitchen table, so the home office deduction is yours. Is it?
Not if you are an employee, and not if the table is also where the family eats. The deduction requires that you regularly use part of your home exclusively for business and that it be your principal place of business, and it is for the self-employed. A legitimate deduction is an ordinary and necessary cost, actually incurred and documented. Matthew 22:21 cuts both ways: pay what is owed, and claim what the law plainly grants, because refusing a real deduction is not piety. You remain legally responsible for your return even if someone else prepared it, and a preparer who will not sign or supply a PTIN is a red flag.
Do this now
If you are self-employed, multiply net profit so far this year by 0.153 and compare that with the estimated tax you have already sent. If you are not, confirm you can still find the cost basis of anything you might sell. Neither task files a return.