How Much to Set Aside for Taxes When Self-Employed

Quick answer: Most self-employed people should set aside 25% to 30% of net profit for taxes. That covers 15.3% self-employment tax on most of your profit plus federal income tax at typical rates, with some room for state tax. High earners or people in high-tax states may need 35% or more; people with low profits may need less.

When you work for yourself, no employer withholds tax from your pay. Every dollar a client pays you is pre-tax, and the bill arrives later, in quarterly estimates and at filing time. The answer to how much to set aside for taxes when self-employed depends on your profit, filing status, deductions and state. This guide explains the rule of thumb, shows exactly where the money goes using 2026 federal figures, works through a real example, and gives a simple system so you are never caught short. It is general information, not tax advice.

What taxes do self-employed people pay?

Tax	Rate (2026)	Applies to
Social Security portion of SE tax	12.4%	92.35% of net self-employment earnings, up to the $184,500 wage base
Medicare portion of SE tax	2.9%	All net SE earnings, no cap
Additional Medicare tax	0.9%	Earnings above $200,000 single / $250,000 married filing jointly
Federal income tax	10% to 37%	Taxable income after deductions
State and local income tax	0% to over 13%	Depends on state and city

Self-employment tax is the self-employed version of Social Security and Medicare (FICA), covering both the employee and employer halves. You can deduct half of it when calculating income tax. Our guide to self-employment tax explains the calculation, and the 2026 federal tax brackets show the income tax side. Official details are in IRS guidance on self-employment tax.

How much to set aside for taxes when self-employed: the 25-30% rule

The rule of thumb works because of how the pieces add up. SE tax alone costs about 14.1% of profit (15.3% x 92.35%). Federal income tax for a single filer with moderate profits, after the standard deduction and the qualified business income deduction, often lands between 5% and 12% of profit. Add a few percent for state tax and you reach 25% to 30%.

Annual net profit (single, no other income)	Suggested set-aside	Why
Under $30,000	15% to 20%	SE tax dominates; standard deduction absorbs much income tax
$30,000 to $100,000	25% to 30%	SE tax plus 10% to 12% (some 22%) income tax brackets
$100,000 to $200,000	30% to 35%	22% and 24% brackets; QBI deduction still helps
Over $200,000	35% to 40%+	Higher brackets, additional Medicare tax, state tax

These ranges are illustrative starting points, not a calculation of your tax. Add your state's rate on top if you live in a state with high income tax.

Worked example: $80,000 profit in 2026

Maya is a single freelance designer with $80,000 net profit on Schedule C in 2026, no other income, and she takes the standard deduction.

Step	Calculation	Amount
Net SE earnings	$80,000 x 92.35%	$73,880
Self-employment tax	$73,880 x 15.3%	$11,304
Deduction for half of SE tax	$11,304 / 2	$5,652
Adjusted gross income	$80,000 - $5,652	$74,348
Standard deduction (single)		$16,100
Income before QBI deduction	$74,348 - $16,100	$58,248
QBI deduction (20%, limited to 20% of taxable income)	$58,248 x 20%	$11,650
Taxable income	$58,248 - $11,650	$46,598
Federal income tax	$1,240 + 12% x ($46,598 - $12,400)	$5,344
Total federal tax	$11,304 + $5,344	$16,648 (20.8% of profit)

If Maya lives in a state with an effective income tax of about 4%, add roughly $3,200, bringing her total to about $19,850, or 24.8% of profit. Setting aside 25% to 30% covers it with a buffer. The QBI deduction is explained in our Section 199A guide. Deductions such as a home office, retirement contributions or self-employed health insurance would lower her bill further.

How to set aside money for taxes: a simple system

1. Open a separate tax savings account. Keep it at your business bank so transfers are instant.
2. Pick a percentage. Start at 25% to 30% of each payment, or your own estimate from last year's return.
3. Transfer on every payment. When a client pays an invoice, move the percentage the same day. Automate it if your bank allows rules.
4. Track profit monthly. Record expenses so you know your real profit; see self-employed tax deductions.
5. Pay quarterly estimates. Use IRS Direct Pay or EFTPS; see how to pay the IRS online.
6. Recalculate each quarter. Adjust the percentage if income or expenses change.
7. Settle up at filing. Use the balance for any amount due in April, or keep the surplus.

When are estimated taxes due?

Income earned	Due date for 2026 tax year
January 1 to March 31	April 15, 2026
April 1 to May 31	June 15, 2026
June 1 to August 31	September 15, 2026
September 1 to December 31	January 15, 2027

To avoid the underpayment penalty, pay at least 90% of this year's tax or 100% of last year's tax (110% if last year's AGI exceeded $150,000) through timely payments. See quarterly estimated taxes for freelancers and the estimated tax penalty guide.

What if you also have a job, or are married?

If you have a W-2 job as well as freelance income, your wages use up the lower income tax brackets and the standard deduction first. Your self-employment profit is then taxed at your marginal rate, which might be 22% or 24% rather than 10% or 12%. Add about 14.1% SE tax and you may need to set aside 35% or more of freelance profit. One alternative is to increase withholding at your job using Form W-4, which the IRS treats as paid evenly through the year and can remove the need for quarterly estimates.

Married couples filing jointly get wider brackets and a $32,200 standard deduction for 2026, which often lowers the effective rate on one spouse's self-employment income. But if both spouses earn well, combined income can push freelance profit into higher brackets. Run the numbers on your joint income, not the freelance income alone.

How to lower the amount you need to set aside

• Track every deductible expense: software, equipment, a business share of phone and internet, mileage, professional fees.
• Contribute to a retirement plan: a SEP-IRA or solo 401(k) reduces income tax (not SE tax).
• Use an HSA if you have a qualifying high-deductible health plan.
• Get paid faster: it does not lower tax, but steady cash makes it easier to transfer the set-aside every time. Clear invoices with due dates from our free invoice generator help clients pay on time.
• Review your structure once profits are high; see the LLC tax rate guide for when an S corp election can reduce payroll-type taxes.

Common mistakes when setting aside taxes

• Forgetting self-employment tax. New freelancers often budget only for income tax and miss the 15.3%.
• Waiting until April. Without quarterly payments, penalties build up.
• Using the set-aside account for cash flow. Borrowing from the tax pot when a client pays late is how tax debt starts. Chase invoices instead; see how to ask for payment.
• Ignoring 1099-K and platform income. All income counts; see the 1099-K threshold.
• Not adjusting for growth. If income doubles mid-year, your percentage and estimates must rise too.
• Skipping state estimates. Most states with income tax want quarterly payments too.

Doing gig work alongside a job? Read side hustle taxes; you may be able to raise W-4 withholding at your job instead of paying estimates.

Knowing how much to set aside for taxes turns a scary April bill into a routine transfer. The habit starts with getting paid on time, so send clear invoices with due dates using our free invoice generator. It is free, needs no sign-up and downloads a PDF built in your browser.