How Much Should Freelancers Set Aside for Taxes: 25–30%?

Most freelancers should set aside 25% to 30% of their net income for federal taxes, and closer to 30% to 35% if they live in a state with an income tax. That range covers the two obligations a freelancer carries that a W-2 employee doesn’t fully see: the 15.3% self-employment tax and federal income tax at rates from 10% to 37%. The exact number depends on how much you earn, where you live, and how many deductions you can claim.

What the 25–30% Actually Covers

As an employee, your employer withholds income tax and pays half of your Social Security and Medicare contributions. Freelancers pay both halves themselves, which is why the tax bite feels larger at the same income level.1Social Security Administration. What Are FICA and SECA Taxes? The savings rate stacks two things together:

Self-employment tax is applied to 92.35% of your net earnings, not the full amount, mirroring the employer-side adjustment W-2 workers receive. You can also deduct half of your regular self-employment tax when calculating adjusted gross income, which softens the income-tax side of the bill.4Office of the Law Revision Counsel. 26 U.S.C. 164 – Taxes

Take a single filer with $80,000 in net profit and the standard deduction. Self-employment tax runs about $11,300, and federal income tax after the available deductions comes to roughly $6,400. That’s around 22% of gross earnings just to the federal government. Layer on a state income tax of 5% to 10% and you land in the 25–30% band, sometimes above it.

Adjust the Rate to Your Situation

The 25–30% band is a starting point, not a fixed answer. A few factors move the number up or down.

Your Income Level

Federal income tax is progressive: each bracket rate applies only to income within that bracket, not to everything you earn. The 2026 brackets for single filers run 10% up to $12,400, 12% to $50,400, 22% to $105,700, 24% to $201,775, 32% to $256,225, 35% to $640,600, and 37% above that.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 A freelancer whose earnings sit mostly in the 12% bracket has a very different average rate than one whose earnings run into the 24% bracket. Higher earners should set aside more.

One thing works in favor of very high earners: the 12.4% Social Security portion of self-employment tax stops at the annual wage base, which is $184,500 for 2026.5Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet Every dollar above that cap is only subject to the 2.9% Medicare portion, so the effective self-employment tax rate drops on income beyond it.

Filing Status

Married couples filing jointly get wider brackets, with the 10% bracket covering up to $24,800 and the 37% bracket not starting until income exceeds $768,700. A freelancer whose spouse earns little or nothing effectively enters each bracket at roughly double the single-filer threshold, which can noticeably reduce the overall rate. The 2026 standard deduction is $16,100 for single filers and $32,200 for joint filers, and it comes off adjusted gross income before the brackets apply.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026

State Income Tax

State rates range from zero in states without an income tax to over 10% in the highest-tax jurisdictions, and some cities add a local income tax on top. If you live in a state with a meaningful income tax, adding 5% to 10% onto your federal savings rate is a reasonable starting point. Freelancers who’ve moved recently or who work across state lines should check whether they owe tax in more than one state, since residency and sourcing rules vary.

Rough guidance: freelancers earning under $50,000 in a no-income-tax state can often get by with 20% to 25%. Six-figure earners in high-tax states should plan on 30% to 35% or more.

Deductions That Shrink the Base You Owe On

The gap between gross revenue and taxable income is where freelancers have the most control. Every legitimate business expense reduces both self-employment tax and income tax, because both are calculated on net profit.

Freelance income and expenses go on Schedule C. Common deductible categories include advertising, office supplies, software subscriptions, professional services like legal or accounting fees, business insurance, travel, and business meals. Equipment and vehicle expenses also qualify, though depreciation rules apply to larger items.

Several deductions specific to self-employed workers can move the number meaningfully:

  • Home office. If part of your home is used regularly and exclusively for business, the simplified method allows $5 per square foot up to 300 square feet, for a top deduction of $1,500. The regular method can produce a larger deduction if you have high housing costs, but it requires tracking actual expenses.6Internal Revenue Service. Simplified Option for Home Office Deduction
  • Health insurance premiums. Self-employed workers who aren’t eligible for coverage through a spouse’s employer plan can deduct 100% of premiums for themselves, a spouse, and dependents, provided the plan is established under the business and there’s net self-employment income.7Internal Revenue Service. Instructions for Form 7206
  • Retirement contributions. SEP IRAs allow contributions up to 25% of net self-employment earnings, and solo 401(k) plans combine employee deferrals with employer-style contributions for higher total limits. Contributions reduce current-year taxable income and grow tax-deferred.8Internal Revenue Service. Retirement Plans for Self-Employed People
  • Qualified business income (QBI) deduction. Section 199A lets many freelancers deduct up to 20% of qualified business income on top of normal expenses. For 2026, the deduction begins phasing out for single filers with taxable income above approximately $203,000 and joint filers above roughly $406,000. Below those thresholds, most freelancers can take the full 20% regardless of industry. Above them, service-trade professions like law, accounting, consulting, medicine, and financial services see the deduction shrink and eventually disappear.

Thorough recordkeeping is where these deductions live or die. If you don’t have a receipt, log, or bank record, you can’t defend the expense if the IRS asks.

Paying It In: Quarterly Deadlines and Safe Harbor

The IRS expects freelancers to pay as they earn, not in a single April lump. Quarterly estimated payments are calculated using the worksheet in Form 1040-ES, which projects your annual liability and splits it into four payments.9Internal Revenue Service. 2026 Form 1040-ES – Estimated Tax for Individuals

The four due dates are:10Internal Revenue Service. Individuals 2 – When to Pay Estimated Tax

  • April 15, for income earned January through March
  • June 15, for income earned April through May
  • September 15, for income earned June through August
  • January 15 of the following year, for income earned September through December

The periods aren’t evenly spaced. If a due date falls on a weekend or holiday, it shifts to the next business day. You can pay through IRS Direct Pay from a bank account, through your IRS Online Account, by debit or credit card (a processing fee applies), or by mailing a check with the 1040-ES voucher.11Internal Revenue Service. Pay Personal Taxes From Your Bank Account

Avoiding an Underpayment Penalty

Missing a payment or paying too little triggers an underpayment penalty, charged as interest on the shortfall at a rate that adjusts quarterly. For early 2026 that rate is 7% per year, compounded daily.12Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 The penalty applies separately to each underpaid quarter.

Two safe harbors keep you clear. If your total tax bill minus withholding and credits comes to less than $1,000, no penalty applies at all.13Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty Otherwise, pay at least 90% of your current-year tax or 100% of last year’s total tax, whichever is smaller. If your adjusted gross income last year exceeded $150,000 ($75,000 if married filing separately), the prior-year figure rises to 110%.14Internal Revenue Service. Estimated Tax

The prior-year safe harbor is particularly useful in early freelance years. Divide last year’s tax by four and pay that amount each quarter. If you end up owing more when you file, you’ll pay the balance in April without a penalty.

Make the Habit Automatic

The single most reliable way to avoid a scramble at tax time is to move money into a separate account the day each payment lands. Pick a percentage that fits your income and state, transfer it out immediately, and treat what’s left as your real earnings. Adjust the rate up if you find yourself owing at year-end, down if you’re consistently overpaying. Quarterly estimated payments stop being optional once your annual tax bill passes $1,000, and the penalties for skipping them compound in ways that make catching up more expensive than staying current.