What Percentage Should Freelancers Set Aside for Taxes?
Short answer: for most freelancers, set aside 25–30% of every payment for taxes. That single rule keeps you safe in the majority of cases. But the right number depends on your income, your state, and how many deductions you have — so this guide shows where 25–30% comes from, when to go lower or higher, and how to actually move the money before you spend it.
Want the exact figure for your situation instead of a rule of thumb? The free Freelance Rate Calculator → nets your income against self-employment and income tax and shows your real take-home — and the amount you should be parking.
Where the 25–30% comes from
As a freelancer you owe two separate taxes on your profit, and the set-aside has to cover both:
- Self-employment tax — 15.3% of about 92.35% of your net profit (12.4% Social Security up to the wage base + 2.9% Medicare). This is the one that surprises people, because an employer used to split it with you.
- Federal income tax — your ordinary bracket, which for most freelancers lands somewhere between 10% and 24% on the way up.
- State income tax — 0% in a handful of states, up to ~5–10%+ in others.
Stack the SE tax on top of a modest income-tax bracket and you land in the mid-20s to low-30s percent of profit. That's why "set aside about a quarter to a third" is the default advice — it covers both layers with a little cushion.
A set-aside table by income
The percentage isn't flat — it rises as your income climbs into higher brackets. Rough guide for a single freelancer (federal only; add your state):
| Net profit (after expenses) | Set aside roughly |
|---|---|
| Under ~$30,000 | 20–25% |
| ~$30,000–$80,000 | 25–30% |
| ~$80,000–$160,000 | 30–35% |
| $160,000+ | 35%+ (and consider an S-corp) |
Notice it's a percentage of net profit — revenue minus deductible business expenses — not your gross invoices. The more legitimate deductions you have, the lower your taxable profit and the less the dollar amount stings.
Want your exact percentage, not a range? Use the free Freelance Rate Calculator → — plug in your income, expenses, and state and it shows your real tax bill and the share of each payment to set aside.
When to set aside less than 25%
- You have lots of deductions. Heavy expenses, a home office, or big retirement contributions shrink taxable profit.
- You're in a no-income-tax state and your income is low — you may only be covering SE tax plus a small federal bracket.
- You have a day job too. If a W-2 job is already withholding heavily, your freelance side income may be taxed at a known marginal rate you can target precisely.
When to set aside more than 30%
- High profit. Once you're in the 24%+ federal bracket, 30% won't be enough — climb toward 35%.
- A high-tax state (e.g. California, New York) adds several points on top.
- Thin deductions. If almost all your revenue is profit (services with low overhead), the full rate hits more of it.
When in doubt, round up. Over-saving means a refund or a head start on next quarter; under-saving means scrambling in April. The first-year tax shock is almost always an under-saving problem.
How to actually set it aside
Knowing the percentage is useless if the money sits in your checking account and gets spent. The system that works:
- Open a separate "tax" savings account. A free high-yield savings account is ideal — it even earns a little interest while it waits.
- Skim on every payment, not monthly. The moment a client pays, move your percentage to the tax account. Treat it as money that was never yours.
- Pay quarterly from that account. Four times a year you send estimated taxes straight from the tax bucket — see the quarterly deadlines.
- True up once a year. Whatever's left after filing is your buffer or a bonus. If you came up short, bump the percentage.
Example: a $4,000 invoice lands. You move $1,120 (28%) to the tax account the same day and run your business on the remaining $2,880. Do that on every payment and the quarterly bill is already sitting there waiting.
Stop guessing your tax set-aside
A flat rule of thumb is fine to start, but the exact share of each payment depends on your income, expenses, and state. The $9 Freelance Rate & Tax Calculator spreadsheet nets your income against self-employment and income tax so you know the precise percentage to skim from every invoice — and your real take-home after it. Sending invoices too? Get the calculator + invoice template in the $14 Starter Pack →
Frequently asked questions
What percentage should I set aside for freelance taxes?
For most freelancers, setting aside 25–30% of every payment for taxes is a safe default. It covers the 15.3% self-employment tax plus a typical federal income-tax bracket, with a small cushion. Lower earners with strong deductions may only need about 20%, while high earners in high-tax states should set aside 35% or more.
Is the set-aside percentage based on revenue or profit?
It is based on your net profit — your revenue minus deductible business expenses — not your gross invoices. The more legitimate business expenses and deductions you have, the lower your taxable profit, so the same percentage covers a smaller dollar amount of tax.
Why is freelance tax so much higher than a regular paycheck?
Because freelancers pay self-employment tax of 15.3% on top of income tax. As an employee, your employer paid half of Social Security and Medicare for you and withheld income tax automatically. As a freelancer you cover both halves yourself and nothing is withheld, so you have to set the money aside on your own.
Where should I keep the money I set aside?
In a separate savings account dedicated to taxes, ideally a free high-yield savings account so it earns a little interest while it waits. Move your set-aside percentage there the moment each client pays, and pay your quarterly estimated taxes straight from that account so the money is never confused with spending cash.
What if I set aside too much?
Setting aside slightly too much is the good problem to have. Any surplus after you file becomes a buffer, a head start on next quarter's payment, or simply money you get to keep. It is far better to over-save and refund yourself than to under-save and scramble to cover the bill in April.