How Much Should a Freelancer Set Aside for Taxes? (2026 Guide)

Transparency: I built Tally Assistant, an AI bookkeeping tool for freelancers. This guide uses the official 2026 IRS rates; your exact rate depends on your filing status, deductions, and state — confirm with a tax professional.

Quick Answer

Set aside 25-30% of net income for taxes if you're a freelancer in 2026. Budget 30-35% if you have state income tax or a higher income. That covers self-employment tax (15.3%), federal income tax, and most state taxes. The number is calculated on net income — revenue minus business expenses — so the more deductions you track, the less you owe.

---

Why 25-30%? The math

Freelancer taxes have two parts:

1. Self-employment tax: 15.3% — 12.4% Social Security + 2.9% Medicare, applied to 92.35% of net profit (this 92.35% adjustment is the IRS accounting for the employer-half deduction W-2 employees get).

2. Federal income tax — the ordinary brackets, minus the standard deduction and any other deductions/credits.

Together for most freelancers: roughly 21-26% of net income at the low end, up past 30% as income rises. The 25-30% rule covers that range with a small buffer for tax-season surprises.

A worked example (illustrative)

Line	Amount
Freelance revenue	$60,000
Business expenses	–$10,000
Net profit	$50,000
Self-employment tax (15.3% × 92.35% of net)	≈ $7,065
Federal income tax (single, after standard deduction)	≈ $4,000-6,000
Total federal tax	≈ $11,000-13,000
As a % of net income	≈ 22-26%
With state income tax (e.g. 4-13%)	≈ 28-35%

Illustrative figures for a single filer — brackets and the standard deduction change yearly and with filing status. The self-employment tax line is exact at current rates.

That's where the rule of thumb comes from: 25-30% covers the no-state-tax case, 30-35% covers everyone else.

The three numbers that matter more

1. Your net income, not your revenue. Taxes are on profit. A freelancer who grosses $100K but nets $60K after legitimate expenses owes on $60K. This is the single biggest lever you control — and it's why accurate expense tracking pays you twice (real money at tax time, plus lower quarterly payments). If you're not claiming deductions you're entitled to, you're funding the IRS by default.

2. Your state. Nine states have no income tax — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. If you live anywhere else, add your state rate (up to 13.3% in California for top brackets) to the federal total. A 25% federal-only habit in a high-tax state is a guaranteed April surprise.

3. Your payment timing. If you've been freelancing all year and made zero estimated payments, the 2026 quarterly deadlines (September 15 and January 15 remaining) matter more than your percentage — late payments accrue a ~7% annualized penalty that compounds daily. Paying the right amount on time beats over-saving late.

Where to keep the money

The percentage only works if the money actually exists in April. The system that works:

1. Open a separate high-yield savings account — your tax account.
2. Every time you get paid, move 25-35% of net income there (same-day transfer, 30 seconds).
3. Never touch it except for quarterly estimated payments and the April final balance.

That's it. The interest is a small bonus; the real win is that your tax money is structurally unreachable. The freelancers who struggle aren't the ones who earn too little — they're the ones who spend the set-aside in November.

What if you already fell behind?

Honest answer: you owe the balance on April 15, plus underpayment penalty (approximately 7% annualized, daily compounding) on the quarterly shortfalls. If you can't pay in full: file on time anyway, then set up an IRS installment agreement — it caps the damage with a modest setup fee, and the late-payment penalty is much smaller than the failure-to-file penalty for not filing. Do not skip the return.

The bottom line

25-30% of net income, every time you get paid, into a separate account. 30-35% in income-tax states. Tax applies to net profit, so track every legitimate expense — and if your income varies wildly, Schedule AI keeps your quarterly payments fair.

Want the exact number for your situation? Our self-employment tax calculator estimates it in 60 seconds from your revenue and expenses — or import your bank transactions and let Tally Assistant compute your net income automatically, month by month. Sign up free — no credit card required.