How much should I set aside for taxes as a freelancer?

What you should set aside as a freelancer

If you're self-employed, no one is withholding tax from your pay, so you owe two things directly: federal income tax and self-employment (SE) tax. SE tax alone is 15.3% on most of your profit, and it stacks on top of income tax — which is why a freelancer's true rate is higher than a W-2 employee's at the same income.

A common rule of thumb is to set aside 25–30% of net profit, but that's a guess. This tool computes the actual figure from your numbers: SE tax, income tax after the $16,100 (single) or $32,200 (married filing jointly) standard deduction and the 20% QBI deduction, then divides it across four payments.

How self-employment tax works in 2026

Self-employment tax is Social Security and Medicare for people without an employer to split it with — so you pay both halves, 15.3% total. It applies to 92.35% of your net profit (the formula removes the employer-half equivalent first).

The Social Security portion (12.4%) only applies up to the $184,500 wage base for 2026; above that, only the 2.9% Medicare portion continues. High earners pay an extra 0.9% Medicare surtax on amounts over $200,000 (single) or $250,000 (married filing jointly). You then deduct half of the base SE tax against your income tax — the tool does this automatically.

Your 2026 quarterly due dates

Estimated taxes are due four times across the year. The IRS calls them quarters, but the periods are uneven — the first covers three months and the others two to four. Miss one and interest accrues from that date, even if you catch up later.

The safe harbor: how to avoid an underpayment penalty

You won't owe an underpayment penalty if your payments cover the smaller of 90% of this year's tax or 100% of last year's total tax (110% if your prior-year AGI was over $150,000). Last year's number is the easy target because you already know it.

Enter last year's total federal tax in the calculator and it switches your four payments to this safe-harbor minimum — often lower than paying on this year's estimate, and enough to keep you penalty-free.

When an S-Corp election starts to pay off

As a sole proprietor, all of your profit is hit with SE tax. Elect S-Corp status and you split profit into a reasonable W-2 salary (which still pays FICA) and distributions (which don't). The 15.3% you skip on the distribution portion is the saving.

It isn't free: payroll service plus a separate 1120-S return runs roughly $1,200–$2,500 a year, and the IRS requires the salary to be reasonable for your work. The comparison panel above estimates your gross saving so you can weigh it against those costs — and tells you plainly when there's no saving to be had.

What this estimate does and doesn't cover

Quarterly calculates 2026 federal income tax and self-employment tax for a sole proprietor or single-member LLC, applies the standard deduction and a simplified 20% QBI deduction, and sizes your four estimated payments. It is a planning estimate, not tax advice.

It does not include state or local income tax, the full QBI wage-and-property limitation that applies to higher earners, the qualified-business-income phase-outs for specified service businesses, itemized deductions, tax credits (child tax credit, premium tax credit, retirement-saver credits), the net investment income tax, or business deductions beyond the half-of-SE-tax adjustment. For anything with real money on the line, confirm with a CPA or enrolled agent.