How much should freelancers set aside for taxes

Why freelance income isn't taxed like a paycheck

When you work as an employee, your employer withholds federal income tax, Social Security, and Medicare from every paycheck automatically. As a freelancer or independent contractor, no one withholds anything from what a client pays you — the full amount lands in your account, and it's on you to plan for the tax owed on it later.

That's the core reason a 'set-aside habit' matters: without it, freelancers can spend money that was never really theirs to spend, and then face a large bill (plus potentially penalties for not paying along the way) at filing time.

The two taxes stacked on top of each other

Self-employment tax covers the Social Security and Medicare contributions that would otherwise be split between an employee and employer. For tax year 2026, the combined self-employment tax rate is 15.3% (12.4% Social Security up to a wage base of $184,500, plus 2.9% Medicare with no cap), applied to 92.35% of your net self-employment earnings.

On top of that sits ordinary federal income tax, calculated using the regular tax brackets for your filing status after subtracting the standard deduction (or itemized deductions) and any other adjustments, including the qualified business income (QBI) deduction of up to 20% of qualified business income for eligible taxpayers, which has its own income limits and rules.

Because these two taxes are calculated differently — one on net self-employment earnings, one on total taxable income after deductions — there's no single 'correct' universal percentage. A freelancer with a working spouse's income also on the return will land in a different bracket than someone filing single with only freelance income.

A starting-point range, and why it's a range

Many freelancers use a starting range of roughly 25-30% of net income as a first approximation, then adjust up or down once they've run real numbers. Lower-income freelancers with the standard deduction and no other income may land toward the lower end; higher earners, especially those who cross into higher brackets or the additional Medicare tax thresholds, will often need more.

For tax year 2026, the additional Medicare tax of 0.9% applies to earnings above $200,000 for single and head of household filers, or $250,000 for married filing jointly — another reason a flat percentage stops being reliable as income grows.

Treat any percentage as a placeholder to replace with your own calculation once you have a few months of real income and expense data.

• Lower net income, standard deduction, no dependents: often nearer 20-25%
• Solid mid-range freelance income, some deductible expenses: often nearer 25-30%
• High income crossing additional Medicare tax thresholds: often 30%+

Worked example: a $70,000 net income freelancer

Suppose a single freelancer nets $70,000 in self-employment income for 2026 (revenue minus deductible business expenses), with no other income and no dependents. The self-employment tax base is 92.35% of $70,000, or $64,645. At 15.3%, that's roughly $9,891 in self-employment tax.

Half of self-employment tax is deductible as an adjustment to income, so taxable income before the standard deduction would be roughly $70,000 minus $4,946 (half of SE tax), minus the $16,100 single standard deduction for 2026 — landing around $48,954 in taxable income, before considering the QBI deduction, which could reduce it further for eligible taxpayers.

Running that taxable income through the 2026 single brackets (10% up to $12,400, 12% up to $50,400, and so on) gives an income tax figure well under a flat-rate guess — illustrating why an actual calculation, not a flat 30%, produces a more accurate set-aside number. This is illustrative math only; a real return would also factor in the QBI deduction and any credits.

Setting aside per payment vs. setting aside monthly

Two common systems work well: setting aside a fixed percentage the moment each client payment arrives, or reviewing income monthly or quarterly and topping up a dedicated tax savings account. Per-payment set-asides suit freelancers with irregular, unpredictable income; monthly reviews suit those with more stable retainer-style income.

Whichever system you use, keeping the money in a separate, clearly labeled account (not your everyday checking account) reduces the temptation to treat it as spendable cash and makes it easier to see your quarterly estimated payment coming due.

Adjusting your percentage as the year goes on

Your ideal set-aside percentage isn't static. A slow first quarter followed by a large project in the third quarter can push you into a higher effective bracket for the year, meaning your set-aside rate should increase, not just the dollar amount. Revisiting your estimate each quarter — see our guide on quarterly estimated taxes — keeps the percentage aligned with reality instead of a January guess.

It's also worth remembering that state income tax, where applicable, sits on top of everything described here and is calculated separately under state rules this guide does not cover.

What deductible expenses do to the calculation

Every dollar of legitimate, deductible business expense lowers your net self-employment earnings, which lowers both self-employment tax and income tax. This is why 'net income' rather than gross revenue is the right base for a set-aside percentage — freelancers who apply their percentage to gross revenue without subtracting expenses typically over-save, while those who forget to track expenses at all typically under-save because they're taxed on more income than necessary.

Keeping organized records of business expenses throughout the year, rather than reconstructing them at filing time, is one of the highest-leverage habits for getting this estimate right.

Sources and further reading

• IRS — Self-Employment Tax (Social Security and Medicare Taxes)
• IRS — Publication 505, Tax Withholding and Estimated Tax
• IRS — Qualified Business Income Deduction
• SSA — Contribution and Benefit Base