How Much to Set Aside for Freelance Taxes in 2026
Short answer: set aside 25–30% of your net profit for federal taxes if you're a typical freelancer, and add roughly your state's income-tax rate on top. Lower earners can often get away with ~20%; higher earners should budget 30–35%. The "net" part is critical — you save a share of profit after expenses, not your gross income. Here's how to land on your exact percentage.
Use the free Freelance Rate Calculator → to price work that already covers this tax, so the set-aside comes out of money you planned for — not a surprise.
Why freelancers have to set money aside at all
As a W-2 employee, your employer withholds taxes from every paycheck — you never see that money, so you never have to discipline yourself. As a freelancer, nothing is withheld. Clients pay you the full amount, and the entire tax bill is yours to manage and pay, usually four times a year as quarterly estimated taxes. The freelancers who get into trouble are the ones who treat the full payment as income and discover the bill in April. The fix is mechanical: skim a fixed share off every payment the moment it lands.
The two taxes your set-aside has to cover
- Self-employment tax — 15.3% of 92.35% of net profit, funding Social Security and Medicare. This alone is bigger than most first-timers expect. See the self-employment tax calculator for the full breakdown.
- Federal income tax on your taxable income at the regular brackets (10%, 12%, 22%, and up), after the half-SE-tax deduction and your standard deduction.
Add the two and most freelancers land around 20–30% of net profit federally — which is exactly why 25–30% is the safe default set-aside. The combined math is laid out in the freelance tax calculator guide.
Want your set-aside calculated to the dollar? Start with the free Freelance Rate Calculator → — and the paid spreadsheet computes your SE tax, income tax and the exact amount to move aside from every payment.
How much to set aside, by income level
A rough guide for a single filer, federal only — add your state rate on top:
| Net annual profit | Set aside (federal) | Why |
|---|---|---|
| Under $40,000 | ~20–25% | Low income-tax brackets; SE tax dominates |
| $40,000–$90,000 | ~25–30% | Climbing into the 22% bracket |
| $90,000–$160,000 | ~30–33% | More income taxed at 22–24% |
| $160,000+ | ~33–37% | Higher brackets; SE tax caps then NIIT considerations |
If your state has income tax (most do), add roughly 3–10% depending on the state. When in doubt, round up — a refund-style surplus is far better than a shortfall and a penalty.
A worked example: $70,000 of net profit
Suppose your net profit (after expenses) is $70,000 as a single filer:
| Tax | Estimate |
|---|---|
| SE tax ($70,000 × 0.9235 × 15.3%) | ≈ $9,890 |
| Federal income tax (after deductions) | ≈ $6,400 |
| Total federal | ≈ $16,290 (~23%) |
So a 25% set-aside ($17,500) covers the federal bill with a small cushion. Add ~5% if your state taxes income and you're at a comfortable 30%. Brackets and the SE wage base change yearly, so confirm current figures at irs.gov.
The set-aside system that actually works
- Open a separate tax savings account. The moment a client payment lands, transfer your set-aside percentage into it. Out of sight, out of spending range.
- Set aside on profit, not gross. If a payment includes reimbursable costs or you have heavy expenses, skim from profit so you're not over-saving.
- Pay quarterly from that account. Four times a year you transfer the estimated payment to the IRS — the money is already there. See the quarterly estimated taxes guide for dates and amounts.
- Track every payment. A clean freelancer invoice template tells you exactly how much came in, so the set-aside math is effortless.
Never get surprised by a tax bill again
The free calculator helps you price work that covers your taxes up front. For the exact dollars, the $9 Freelance Rate & Tax Calculator spreadsheet has a Self-Employment Tax tab and a Quarterly Planner — enter your net profit and it returns the precise amount to set aside and pay each quarter. Want the invoice template to track every payment too? Get both in the $14 Starter Pack →
Frequently asked questions
How much should I set aside for taxes as a freelancer?
For most freelancers, set aside 25 to 30% of net profit for federal taxes, plus roughly your state's income-tax rate on top. Lower earners can often use about 20%, while higher earners should budget 30 to 35%. Always base the percentage on profit after expenses, not gross income.
Do I set aside taxes on gross income or net profit?
On net profit — your income after deducting legitimate business expenses. Both self-employment tax and income tax apply to profit, not your gross receipts, so setting aside a share of gross would over-save. Track expenses carefully so you set aside on the right number.
Is 30% enough to set aside for self-employment taxes?
For most freelancers earning under about $90,000 of net profit, 30% comfortably covers federal self-employment and income tax with a small cushion. If your state has income tax or you earn more, you may need 30 to 35% combined. When unsure, round up — a surplus is far safer than a shortfall.
Where should I keep my freelance tax money?
In a separate savings account dedicated to taxes, ideally one that earns interest. Transfer your set-aside percentage the moment each client payment arrives, then pay your quarterly estimated taxes straight from that account. Keeping it separate removes the temptation to spend money that isn't really yours.
What happens if I don't set aside enough for taxes?
You'll owe the full amount at filing plus a possible underpayment penalty for missing or underpaying quarterly estimates. The bill doesn't shrink because nothing was withheld — it just arrives all at once in April. A consistent 25 to 30% set-aside per payment prevents both the shortfall and the penalty.