How Much to Set Aside for Taxes as a Freelancer

For freelancers, taxes can be tough to figure out. You might've pursued a career in something you're passionate about, or looking to have a side gig for some extra funds. Either way, doing your taxes is likely not where you want to spend the majority of your time.

Your first freelance check hits the bank and feels amazing. Then a friend casually mentions they pay 30% of everything to the IRS, and that check feels a lot smaller. So how much should you actually set aside?

The simple rule: 25 to 30% of every payment

As a rule of thumb, set aside 25 to 30% of every freelance payment for taxes. That covers self-employment tax (15.3%), federal income tax, and most state income taxes. Bump it to 35% if you live in a high-tax state or earn more than $100,000.

So here's a breakdown:

• The short answer is 25 to 30% of every payment, moved into a separate savings account the day it lands.
• The longer answer (the one that helps you not over-save or under-save) depends on how much you earn, where you live, and how many business expenses you can deduct.

If you don't want to do any math, set aside 30% of every dollar you make from freelance work. It's a slightly conservative number that covers most freelancers in most situations. If your effective tax rate ends up lower (likely), you'll have a buffer to roll into next year's taxes.

If you'd rather be more precise, the next sections break down where that 30% number comes from and when to adjust it up or down.

Why 25 to 30%? Here's the math

Your freelance tax bill is made up of three pieces:

• Self-employment tax (15.3%). Covers Social Security and Medicare. This is on top of income tax, and it's the part most first-year freelancers don't expect.
• Federal income tax (10 to 22% effective for most freelancers). Depends on your total income and deductions.
• State income tax (0 to 13%). Depends entirely on your state. You can look this up on your state's tax and revenue website to find a more specific number.

Add the middle of those ranges and you land around 27 to 30%. That's where the 30% rule comes from.

💡 Tip: Business deductions reduce all three numbers, not just income tax. Track your home office, mileage, equipment, and software all year and your effective rate drops. Many freelancers over-save in year one and end up with a refund. That's a much better problem than the alternative.

When to set aside more (32 to 35%)

Your tax bill skews higher if any of these apply:

• You earn more than $100,000 in net self-employment income (federal income tax brackets jump to 24% and up).
• You live in a high-tax state (California, New York, Oregon, Minnesota, New Jersey, Hawaii, or Massachusetts).
• You have minimal business expenses to deduct (knowledge workers without a home office, equipment, or travel).
• You have a spouse with W-2 income that pushes your household into a higher bracket.
• You've already maxed out the Social Security wage base ($168,600 in 2026) at a separate job.

If two or more apply, plan for 35%.

When you can set aside less (20 to 25%)

Your effective rate is lower if:

• You have lots of legitimate business deductions (home office, mileage, equipment, software, contractors).
• You live in a state with no income tax (Texas, Florida, Washington, Nevada, Tennessee, South Dakota, Wyoming, Alaska).
• You earn under $40,000 from freelance work, especially with dependents or credits.
• You're contributing significantly to a SEP IRA or Solo 401(k), which reduces your taxable income.

Even if all of those apply, don't go below 20%. The IRS will not be sympathetic if you set aside 15% and end up owing 25%.

How to actually set the money aside

The mechanics matter more than the percentage. The freelancers who never get hit with a surprise bill all do roughly the same thing:

1. Open a separate high-yield savings account labeled "Taxes." Don't link it to your debit card. The friction of moving money out is a feature.
2. Move 30% the day a payment hits. Transfer the percentage of the gross amount (before any fees) into your tax account on the same day the deposit lands.
3. Pay quarterly estimates from this account. Use IRS Direct Pay each quarter. See this article for the full walk-through.
4. Reconcile at year-end. Compare what you owed to what you set aside. If the balance is consistently too high or too low, adjust your percentage for next year.

A worked example

Say you're a freelancer in Texas (no state income tax) earning $80,000 in net self-employment income.

• Self-employment tax: 15.3% × 92.35% × $80,000 = $11,304
• Federal income tax (after standard deduction and SE tax deduction): roughly $7,500
• State income tax: $0

Total: approximately $18,800. That's 23.5% of $80,000.

If you have 25% set aside ($20,000), it would cover this with a small cushion. 30% set aside ($24,000) would leave you with about a $5,000 refund.

Want a quick estimate? Use a self employment tax calculator for the exact calculation.

$2,400 · The average shortfall first-year freelancers face. When you don't set aside money as you earn, the average new freelancer ends up $2,400 short on their tax bill come April.

Common mistakes that lead to under-saving

• Calculating tax on take-home pay only. The IRS taxes net business income, not what you transfer to yourself as "salary."
• Forgetting to set aside cash and Venmo payments. The IRS gets reports on most of these now (especially $600+ via 1099-K).
• Treating your tax savings account as an emergency fund. You should save these funds for tax purposes only, and have a separate emergency fund. If you end up with a refund after filing, you can put this in an emergency fund.
• Setting aside only at quarter-end. By then, the money is usually gone.

Take the math off your plate

KiwiBooks calculates how much money for tax payments that you should set aside in real time. Chat with Kiwi AI to see exactly how much you should move into your tax savings and reminds you when each quarterly payment is due.

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Common questions about freelancer taxes

Do I really need to set aside money every single time I get paid?

Yes, or at least every week. The discipline of doing it immediately is what makes the difference. Once that money sits in your checking account for a few weeks, it tends to disappear.

What if I'm only freelancing as a side hustle?

Same rule, smaller numbers. Set aside 25 to 30% of every freelance payment. If your day job already withholds enough to cover your full federal bill, you might escape quarterly payments, but you still owe the SE tax.

Can I just pay more from my regular savings later?

You can, but you're risking three things: not actually having the money, owing an underpayment penalty, and feeling stressed for months waiting for tax season. The "set-aside" method removes all three.

How do I figure out my exact tax rate?

Pull last year's Form 1040 and divide your total tax (Line 24) by your total income. That's your effective rate. Add 2-3% as a buffer and that's your set-aside percentage.

Bottom line

Set aside 25 to 30% of every freelance payment in a separate account, on the same day the money hits. Adjust up if you live in a high-tax state or earn more than $100,000, and down if you have heavy business deductions or live in a no-income-tax state. Then never touch that account except to pay quarterly taxes.

Related guides

• How to file quarterly estimated taxes as a self-employed person
• What is the self-employment tax rate and how to calculate it
• How to avoid a surprise tax bill as a freelancer