How Much Should Freelancers Set Aside for Taxes? (2026)

Sources: IRS 2026 inflation adjustments (Rev. Proc. 2025-32) · IRS Estimated Taxes · SSA Contribution and Benefit Base

Short answer: set aside 25% of net profit if you live in a state with no income tax, and 30% of net profit if you live in a state that has one. Above about $150,000 in profit, move to 30–35%. The rest of this guide shows where those numbers come from, so you can fine-tune them for your situation.

Why Freelancers Need a Bigger Cushion Than Employees

An employee's taxes are withheld before the paycheck arrives. A freelancer receives the whole payment and owes three separate taxes on it later:

1. Self-employment (SE) tax — 15.3% on 92.35% of net profit. This is Social Security (12.4%, on the first $184,500 of 2026 earnings) plus Medicare (2.9%, no cap). It applies from the first dollar once you net $400 or more.
2. Federal income tax — 10% to 37% on taxable income after the standard deduction ($16,100 single / $32,200 married filing jointly in 2026), the deduction for half of your SE tax, and the 20% qualified business income (QBI) deduction.
3. State income tax — 0% in nine states, and roughly 3–7% of profit in most others (more in California, New York, New Jersey and Oregon at higher incomes).

SE tax is the one that surprises people. It is charged even when your income is too low to owe any income tax, and it is not reduced by the standard deduction or the QBI deduction.

What a Single Freelancer Actually Owes in 2026

The table below uses the 2026 federal brackets and assumes a single filer with no other income, taking the standard deduction and the QBI deduction. "Net profit" is income after business expenses (Schedule C line 31).

Two things stand out. First, even at $25,000 of profit you owe about 16% — almost all of it SE tax. Second, the effective rate climbs slowly, because the QBI deduction takes 20% of your business income out of the income tax base. If you are married and your spouse has no income, the wider joint brackets lower the numbers: about 17.3% at $60,000, 19.5% at $100,000 and 20.7% at $150,000.

Add Your State

State income tax is the biggest variable. As a quick rule, add the following to the federal percentage above:

Some cities add their own income tax (New York City, Philadelphia, several Ohio cities, Kansas City, St. Louis, Detroit and others), and Portland, Oregon and a few other localities levy business taxes on self-employed people. Check your city if you live in one. Our freelancer tax calculator applies your state's rate automatically.

A Worked Example: $80,000 Designer in Georgia

Maya is a single freelance designer. She invoices $92,000 in 2026 and spends $12,000 on software, equipment and a home office.

• Net profit: $92,000 − $12,000 = $80,000
• SE tax: $80,000 × 92.35% × 15.3% = $11,304
• Adjusted gross income: $80,000 − $5,652 (half of SE tax) = $74,348
• Taxable income: $74,348 − $16,100 standard deduction − $11,650 QBI deduction = $46,598
• Federal income tax: $5,344
• Georgia income tax (flat rate, a little over 5% after its $12,000 standard deduction): about $3,200
• Total: about $19,850, or 24.8% of profit (21.6% of what she invoiced)

Setting aside 30% of profit ($24,000) leaves her about $4,150 of cushion — enough to absorb a strong fourth quarter or a surprise, which is the point of a cushion.

When to Set Aside More

• You also have a W-2 job. Your salary fills the low brackets first, so freelance profit is taxed at your top rate plus 15.3% SE tax. Someone earning $70,000 in salary plus $20,000 freelance should save closer to 35% of the freelance profit (22% federal + 15.3% SE, less the SE and QBI deductions, plus state).
• Your profit is above ~$200,000. You enter the 32% bracket, the QBI deduction may start to phase down (for 2026, above $201,775 single / $403,500 joint for service businesses), and the 0.9% Additional Medicare Tax kicks in above $200,000 single / $250,000 joint.
• Your income is lumpy. A single large contract can push you a bracket higher than your average year.
• Your spouse earns a lot. Joint filing stacks your profit on top of their wages.

When You Can Set Aside Less

• You contribute to a retirement plan. A SEP IRA or Solo 401(k) contribution reduces income tax (not SE tax). See our Solo 401(k) vs. SEP IRA guide.
• You pay your own health insurance. Premiums are deductible above the line. See the self-employed health insurance guide.
• You earn tips as a driver or in another tipped job. The new tips deduction can cut income tax. See No Tax on Tips for gig workers.
• You have dependents. The Child Tax Credit ($2,200 per qualifying child for 2026) comes straight off income tax.

A System That Actually Works

1. Open a separate savings account labeled "Taxes." Keep it at a different bank from your checking account if you're tempted to dip into it.
2. Move your percentage the day each payment lands. Doing it per payment, not monthly, means you never have to find a lump sum.
3. Pay the IRS quarterly from that account. 2026 due dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Pay online through IRS Direct Pay or your IRS Online Account — it takes two minutes.
4. Pay your state too. Most states with an income tax have the same four deadlines.
5. True up in the spring. Whatever is left after filing is your bonus. If you came up short, raise your percentage by 3–5 points for next year.

Avoiding the Underpayment Penalty

The IRS charges an underpayment penalty (interest, roughly 7% a year recently) on quarterly payments that are too small or late. You are protected — no penalty, even if you owe a large balance in April — if your total payments reach either:

• 100% of last year's total tax (110% if last year's AGI was over $150,000), or
• 90% of this year's tax.

The "last year's tax" safe harbor is the easiest to use when your income is growing: divide last year's total tax (Form 1040, line 24) by four and pay that each quarter. You'll owe the difference in April, but no penalty. If your income drops, pay based on 90% of this year's estimate instead so you don't overpay.

Also note: if you owe less than $1,000 after withholding and credits, there is no penalty at all — which is why many side-hustlers with modest income never need to file quarterly.

Figures use 2026 federal brackets, the $16,100 / $32,200 standard deduction, the $184,500 Social Security wage base, and the 20% QBI deduction limited to 20% of taxable income. They exclude credits, other income, and state taxes unless stated. This is general information, not tax advice.

This is general information, not tax, legal or financial advice. How we source our data · Report an error