How much to set aside for taxes as a freelancer: find your rate

I read a lot of freelancer ledgers, and the most common rule I find for tax is a guess. Someone told them 25%, or 30%, or "a third to be safe", and they move that much when they remember. Some years it is too little and the spring bill lands on a credit card. Other years it is far too much, and money sits idle that could have paid down a debt.

You do not need a guess. You need one evening, last year's figures and a calculator. Below is how I would work out the percentage for a US freelancer, with every number shown, and how to check it before the last estimated payment for 2026 falls due on 15 January 2027.

This is general education, not tax advice. Your situation (state, deductions, other income, a spouse's pay) changes the answer, and an accountant can confirm it.

Why the right percentage is personal#

"Set aside 25–30%" circulates because it is roughly right for a lot of people. But the tax on self-employed income has two parts that behave very differently:

• Self-employment tax pays your Social Security and Medicare. It is 15.3% (12.4% for Social Security, 2.9% for Medicare), charged on 92.35% of your net profit, so in practice about 14.1% of profit from the first dollar, as this guide from 16 October 2026 sets out. It does not care about your deductions.
• Income tax is progressive. It starts after the standard deduction and climbs through the brackets, so the rate on your whole profit depends on how much profit there is.

On top of that, most states take a share. Put together, a freelancer clearing $30,000 and one clearing $150,000 need very different percentages. A single rule of thumb is bound to be wrong for one of them.

The numbers that matter for 2026#

These are the federal figures I use below. All apply to the 2026 tax year, the one you are paying estimates on now.

• Standard deduction, single filer: $16,100. Brackets: 10% up to $12,400 of taxable income, 12% up to $50,400, 22% up to $105,700. Source: the IRS adjustments reported on 9 October 2025.
• Social Security wage base: $184,500 for 2026, rising to $192,300 in 2027, per the Social Security Administration's 2027 fact sheet (certified 14 October 2026). Profit above the cap pays only the Medicare part.
• Estimated payment dates for 2026: 15 April, 16 June and 15 September 2026, then 15 January 2027, as listed in this guide from 15 May 2026.

The IRS has not yet published the 2027 brackets; they usually arrive in October or November, so plan to rerun your rate in January.

A worked example: one freelancer's rate#

A single web designer invoices $84,000 in 2026. Business costs (software, a laptop, a share of the phone, a coworking day pass) come to $12,000, so net profit is $84,000 − $12,000 = $72,000. No other job, no spouse's income.

Step 1: self-employment tax#

• Taxable base: $72,000 × 92.35% = $66,492
• Self-employment tax: $66,492 × 15.3% = $10,173

Half of that, $5,087, is deductible when working out income tax.

Step 2: income tax#

• Adjusted income: $72,000 − $5,087 = $66,913
• Taxable income: $66,913 − $16,100 standard deduction = $50,813
• Tax: 10% of the first $12,400 is $1,240; 12% of the next $38,000 is $4,560; 22% of the last $413 is $91. Total: $5,891

I have left out the qualified business income deduction, which many sole proprietors can claim. Leaving it out keeps the reserve on the safe side; your accountant can tell you whether you qualify and how much it lowers the bill.

Step 3: state, then the total#

States vary from nothing to several percent. For the example, assume a state that takes about 4% of profit: $72,000 × 4% = $2,880.

The last column is the one you can actually use. You see invoices, not profit, when money lands. So the rule for this designer is: move 23% of every invoice into the tax reserve the day it is paid. A $3,500 invoice means $805 to the reserve. Over the year, 23% of $84,000 is $19,320, which covers the $18,944 with $376 to spare.

Notice that the familiar "25–30%", applied to invoices, would have been too high here: 25% of $84,000 is $21,000, about $2,100 more than needed, and 30% is $25,200, about $6,300 more. At $150,000 of profit the same arithmetic gives a noticeably higher rate, because more of the income reaches the 22% and 24% brackets.

Check it before the January payment#

The fourth estimated payment is the last chance to correct the year. Here is the check I would run in the first week of January.

1. Update the profit. Take your real profit to 31 December, not the forecast.
2. Recompute the federal figure with the steps above.
3. Subtract what you have already paid. Our designer paid three federal estimates of $3,600, so $10,800. $16,064 − $10,800 = $5,264 due by 15 January.
4. Compare with the reserve. If the reserve holds more than the remaining federal and state bills, the surplus is genuinely yours. If it holds less, you know now rather than in April.

If your income jumped this year, look at the safe harbour rules before you panic. You generally avoid the underpayment penalty if your estimates cover 90% of this year's tax or 100% of last year's (110% if last year's adjusted income was over $150,000), as the same May 2026 guide explains. That protects you from the penalty, not the tax itself: the rest is still due when you file.

Make the reserve automatic#

The percentage only works if the money actually moves. A few habits make it stick.

Keep the reserve in the business book#

The tax reserve belongs with the business, not with your groceries. The guide to separating business and personal money explains the two-book setup; the reserve is one account in the business side, and the only things leaving it are tax payments.

Move it on the day the invoice is paid#

A fixed date at the end of the month leaves a window where the tax money looks spendable. Moving it with each payment closes that window. If your income swings month to month, pair this with a fixed salary from the business, as in the zero-based budget for variable income.

Convert foreign invoices at the rate you received#

If clients pay you in euros or pounds, tax is worked out in dollars at the time you were paid. Record each invoice at the rate the money actually converted at, not a rate from a week later; the multi-currency guide covers the habit.

Rerun the rate every January#

Brackets, the standard deduction and the wage base all move each year, and so does your profit. Ten minutes in January keeps the rate honest for the next twelve months.

What to ask an advisor about it#

In Azno, your business book, invoices and transfers sit in one ledger, so these become questions rather than a spreadsheet:

• "What was my business profit this year, and what share of my invoices did I move to the tax reserve?" You see the actual percentage you followed, not the one you meant to.
• "If I set aside 23% of each invoice, how does the reserve compare with the tax I estimate for this year?" The answer shows the surplus or the gap before 15 January.
• "Create a recurring rule that moves 23% of every business income entry to the tax reserve account." It comes back as a proposal, and nothing changes until you approve it.

If you want to find your own rate before the January payment, create a free account and add this year's invoices and costs. One evening of arithmetic beats another year of guessing.