How much should freelancers set aside for taxes?

By Kitson · September 2026 · 6 minute read · US rules

When you work for an employer, tax comes out of every paycheck. When you freelance, sell on Fiverr or run a Payhip shop, nobody withholds anything. The money lands in PayPal in full, and the tax bill arrives later. Setting money aside as you earn is how you avoid a painful surprise.

The short answer

Many US freelancers set aside 25–30% of their profit (income minus business expenses). It's a starting point, not a rule. Your real number depends on your total income, deductions and state.

What you're saving for

1. Self-employment tax

This is Social Security and Medicare for people who work for themselves. It's 15.3% of 92.35% of your net self-employment earnings, once those earnings reach $400 in a year. Employees split this with their employer; freelancers pay both halves. You can deduct half of it when working out your income tax.

2. Income tax

Your freelance profit is added to any other income and taxed at your normal federal rate, plus state income tax if your state has one.

A worked example

Say you have $1,000 of profit and you're in the 12% federal bracket, with no state income tax.

That's about 25% of the profit. In a higher bracket or a state with income tax, it climbs toward 30% or more. This simplified example leaves out the standard deduction and credits, which can lower the bill.

Quarterly estimated payments

If you expect to owe $1,000 or more when you file, the IRS expects you to pay during the year through estimated tax payments. The usual due dates are:

When a date falls on a weekend or holiday, it moves to the next business day. To avoid an underpayment penalty, you generally need to pay at least 90% of this year's tax, or 100% of last year's (110% if your income was higher than $150,000).

A simple set-aside habit

1. Open a separate savings account just for taxes.
2. Every time a payment lands, move 25% of it there. Do it the same day so you never count that money as spendable.
3. Keep receipts for business expenses. They lower your profit, and with it your tax.
4. Before each due date, add up the quarter's profit, and pay your estimate from the tax account.
5. At tax time, anything left over in the account is yours.

You'll likely get a Form 1099-K or 1099-NEC from platforms such as PayPal, Fiverr or Upwork. Report all of your income whether or not you receive one.

This guide explains general US rules as of 2026 and isn't tax or legal advice. Check the IRS Self-Employed Tax Center or ask a tax professional about your situation.