How Much of Each Freelance Payment Should You Put Aside for Tax? (US)

DRAFT — NOT CPA/LEGAL-REVIEWED — in Compliance HOLD until a qualified CPA/legal reviewer is engaged; do not describe as reviewed.

Educational only. This guide explains a system; it is not personal advice for your situation. Before you act on any tax or retirement figure here, consult a tax professional.

Short answer: There is no one percentage that fits everyone. For the $80,000-profit example worked out below, the federal figure lands at about 24% of net profit — or about 20% if a full qualified business income deduction applies. The flat "30%" you see everywhere over-saves for low earners and under-saves for high ones. Work out your own number, then move that money the day each payment lands.

Who this is for: You get paid on 1099s, your income comes in lumps, and April has surprised you at least once. A $9,000 month followed by a $1,200 month is normal life here, not a crisis — but only if the tax money was already moved aside.

Who this is not for: If you run an S corporation and pay yourself a salary, or you have employees, your mechanics are different. This guide would steer you wrong, so skip it.

The habit that matters more than the percentage

Here is the whole system in four lines. Every payment goes into a business account first. The day it lands, you move your set-aside percentage into a separate tax account. You live on what is left. And you treat money once it moves into the tax account as already spoken for. It stops being spending money the day it moves.

That sounds simple. It is simple. It is also the part most people skip, and then they spend the year wondering where the tax bill came from. It came from the money they already spent.

Two taxes, not one — and that is the surprise

Freelancers owe two federal taxes on the same profit:

• Self-employment (SE) tax, 15.3%. Social Security at 12.4% plus Medicare at 2.9%. An employee splits these with their employer. You are both halves, so you pay both. It applies to 92.35% of your net profit — that is, your freelance income minus deductible business expenses — not to the full amount. The Social Security part stops at the 2026 wage base of $184,500. Medicare has no cap. Above $200,000 of net self-employment income for a single filer ($250,000 married filing jointly), another 0.9% Medicare tax kicks in.
• Federal income tax. This one comes after you subtract half your SE tax, your standard deduction, and anything else you qualify for, and run the result through the brackets (10% to 37% for 2026).

One detail explains most April shocks: the standard deduction — $16,100 single, $32,200 married filing jointly, $24,150 head of household for 2026 — lowers your income tax. It does nothing at all to your SE tax. People who forget that second tax are the people staring at a bill they thought they had covered.

State income tax sits on top in most states. The examples below are federal only. Add your state's share to your own percentage.

The maths, with a real example

Take a fictional freelancer, Maya, a single designer who nets $80,000 in 2026 after business expenses. Standard deduction, no other income, no retirement deduction in this example. This is her first $80,000 year — the year the old "just save 30%" advice starts to feel expensive.

Step 1 — SE tax

Step 2 — Income tax

Step 3 — The rate

SE tax plus income tax comes to $18,830.24. On $80,000 of net profit, that is 23.5% — call it 24% for your set-aside.

But watch the wording. That is 24% of net profit, not of every cheque that arrives. If your expenses run 20% of what you bill, 24% of profit is roughly 19% of gross billings. Save 24% of gross and you will over-save all year. Save 24% of profit and you are about right. The linked calculator does that conversion once you enter your expense ratio.

What moves your number up or down

• The qualified business income (QBI) deduction (IRC §199A, up to 20% of qualified business income, with limits) can cut it a lot. A simplified 20% QBI deduction of about $14,870 on Maya's figures — 20% of profit after half SE tax (20% × $74,348.18 = $14,869.64) — would drop her taxable income to about $43,379, her income tax to about $4,957, and her total federal bill to about $16,261 — a rate of about 20%, not 24%. Simplified, because QBI has its own definitions, wage limits, and service-business rules, and it never reduces SE tax. Do not just assume you get the full 20%. This is the biggest single reason a personal calculation beats a flat rule.
• Retirement contributions — a SEP IRA or Solo 401(k), see Guide C1 — lower taxable income too. They also do not lower SE tax.
• More profit pushes the rate up, as more income lands in the 22% and 24% brackets, until you pass the Social Security wage base. After that, the marginal SE rate falls to 2.9% (plus that 0.9% above the threshold) and the curve flattens.
• Less profit pushes it down. At $40,000 of net profit, the same method gives SE tax of about $5,652 and a far smaller income-tax bill. A 30% blanket rule would leave a low earner needlessly short of cash all year.

Making it stick, week by week

Three accounts: business receiving, tax holding, personal spending. If the tax account lives at a different bank, even better — friction helps here.

Move the money the day it lands. If you have not worked out your own rate yet, start at 25% of net-profit equivalent and fix it at your first quarterly true-up. That is a starting point while you do the maths, not a recommendation for your situation.

Then recompute every quarter, when you make your estimated payment (see Guide B2). Compare what you set aside against what you actually owe on year-to-date profit, and adjust for next quarter. A rate set in January on a guessed income is a guess. A rate revised in June on real income is a system.

And one rule with no exceptions: never borrow from the tax account. Not for a slow month, not for a late invoice, not "just until Friday." A slow month is what the buffer account is for (see Guide A1). The tax account is not a credit line.

If you also have a W-2 job

Your W-2 wages count toward the $184,500 Social Security wage base first, which can shrink or wipe out the 12.4% part on your freelance income. Your W-2 withholding also counts toward the estimated-tax safe harbors. Run the calculator with both incomes entered. Do not apply the freelance-only rate to your combined income.

The mistakes worth naming

Setting aside a percentage of gross billings and forgetting expenses. Forgetting SE tax exists. And the quiet one: over-saving all year, then celebrating a refund. A refund means you lent the government money interest-free while your business went short. Aim close to the true bill, not as high as possible.

Checklist

• Three accounts open: business, tax, personal.
• Your own set-aside rate worked out from last year's profit or this year's forecast.
• A same-day transfer rule, written down — not just intended.
• Quarterly true-up dates in the calendar.
• State tax added, or a separate state set-aside.

What to do next

1. Work out your own set-aside number from the example maths in this guide.
2. Run a real payment through the tax set-aside calculator.
3. Consult a tax professional before you file or change how much you pay.

Sources

• IRS Publication 334, Tax Guide for Small Business (SE tax, Schedule C, Schedule SE).
• IRS Schedule SE and instructions (92.35% multiplier; half-SE-tax deduction, IRC §164(f)).
• IRS Revenue Procedure 2025-32 (2026 standard deductions and income-tax brackets: single $16,100; 10% to $12,400, 12% to $50,400, 22% to $105,700, 24% to $201,775, 32% to $256,225, 35% to $640,600, 37% above).
• Social Security Administration, 2026 wage base announcement ($184,500).
• IRC §199A (QBI deduction, up to 20%, limits apply); IRS Publication 535 (business expenses).

Source links: IRS 2026 inflation adjustments, Revenue Procedure 2025-32 · SSA 2026 contribution and benefit base, $184,500 · IRS Publication 505 (estimated tax) · IRS Publication 334 · IRS business-expense resources (Publication 535, discontinued after 2022) · Instructions for Schedule SE

Educational only. Tax law changes every year and your situation may differ — consult a tax professional before relying on any figure here. Figures are for tax year 2026, reviewed 25 Oct 2026.

Before you act: tax and retirement rules change, and your situation has details a guide cannot see. For any figure you plan to file, claim, or contribute on the basis of this page, consult a tax professional first.

Related guides and tools

• the tax hub
• freelancer quarterly taxes and the safe harbor rule
• self-employment tax, the 15.3% nobody warns you about
• the separate-accounts system for tax, buffer, and spending money
• work out your own tax set-aside

Dated assumptions: draft content as checked 25 October 2026; tax and retirement figures are for tax year 2026 where stated. Verify current-year limits, rates, and deadlines before acting, as the IRS adjusts them annually.