One of the hardest adjustments when you start freelancing is that nobody withholds taxes for you. Every payment arrives in full, and it’s tempting to treat it all as spendable income. The result is often a painful bill in April. This guide explains how much to set aside, how to calculate a number that fits your situation, and how to make saving automatic.
The Quick Answer: 25% to 30%
For most freelancers in the United States, setting aside 25% to 30% of every payment is a reasonable starting point. This range typically covers:
- Federal income tax
- Self-employment tax (Social Security and Medicare, about 15.3% of net earnings)
- A cushion for state income tax, where applicable
Your ideal percentage may be lower or higher depending on your income level, deductions, and where you live.
Why the Percentage Varies
Several factors move your number up or down:
- Net income: Higher earnings push part of your income into higher federal tax brackets.
- Deductions: Business expenses, retirement contributions, and health insurance premiums reduce your taxable income, which can lower the percentage you need.
- State taxes: States like California and New York have significant income taxes, while Texas, Florida, and Washington have none on wages.
- Other income: A W-2 job, a spouse’s income, or investment earnings can change the bracket your freelance income falls into.
A Rough Guide by Income Level
These are illustrative ranges, not exact figures:
| Estimated Net Freelance Income | Suggested Set-Aside |
|---|---|
| Under $30,000 per year | 20% to 25% |
| $30,000 to $75,000 per year | 25% to 30% |
| $75,000 to $150,000 per year | 30% to 35% |
| Above $150,000 per year | 35% or more |
If you live in a high-tax state, lean toward the upper end of your range.
How to Calculate Your Own Number
Step 1: Estimate your annual net income.
Project your total freelance revenue for the year, then subtract expected business expenses.
Step 2: Estimate self-employment tax.
Multiply your net income by 92.35%, then by 15.3%. This is your approximate self-employment tax.
Step 3: Estimate income tax.
Subtract half of your self-employment tax and the standard deduction from your net income, then apply the current federal tax brackets to the remainder. Add your state tax estimate if applicable.
Step 4: Divide total tax by total income.
The result is your personal set-aside percentage. The IRS Tax Withholding Estimator and a free online self-employment tax calculator can help you check the math.
A Simple System That Works
- Open a separate savings account used only for taxes.
- Transfer your percentage every time you get paid, ideally the same day.
- Pay your quarterly estimates from that account (see our guide on quarterly estimated taxes).
- Review your percentage every quarter, adjusting if your income or expenses change.
Whatever remains in the account after you file is a bonus you can move to your emergency fund or retirement savings.
What About Irregular Income?
If your income swings from month to month, the percentage method works better than a fixed dollar amount. A $6,000 month and a $1,500 month both get the same 25% to 30% treatment, so you automatically save more when you earn more. This is also why many freelancers pair it with a monthly «salary» system (see our guide on budgeting with irregular income).
Common Mistakes to Avoid
- Saving a percentage of your take-home instead of your gross payment. Set aside the percentage before you spend anything.
- Forgetting state and local taxes. Check your state’s rules and add them to your estimate.
- Mixing tax money with spending money. Without a separate account, that balance disappears quickly.
- Ignoring quarterly deadlines. Setting money aside is only half the job; you also need to pay on time to avoid penalties.
Frequently Asked Questions
Is 30% too much to set aside?
Not usually. If you end up with extra, you’ll have a refund or a head start on next year. Setting aside too little is the riskier mistake.
Do I set aside taxes on gross or net income?
Ideally, on each payment as you receive it, then adjust after accounting for deductions. Starting with gross payments keeps it simple and protects you from underestimating.
What if I can’t afford to set aside 25% right now?
Start with what you can, even 10% to 15%, and increase it as your income grows. Partial saving is far better than none, and paying something toward each quarter reduces potential penalties.
Disclaimer: This article is for general informational purposes only and does not constitute tax or financial advice. Percentages are illustrative estimates, and tax rules change yearly. Verify current figures on IRS.gov and consult a qualified tax professional for guidance specific to your situation.
Last updated: 28-09-2026