How much should a freelancer set aside for taxes?

The short version: most self-employed people in the US should hold back somewhere between 25% and 35% of every payment that lands. Not of your profit at year end — of each payment, the day it arrives.

That range feels high the first time you read it, and it's the single most common reason a first-year freelancer ends up owing money they've already spent.

Why the number is bigger than you expect

When you were an employee, two things happened invisibly on every paycheck. Income tax was withheld, and your employer paid half of your Social Security and Medicare. Self-employed, both of those land on you.

• Self-employment tax is roughly 15.3% on your net profit, and it starts from the first dollar of profit — there is no standard deduction protecting it.
• Income tax sits on top of that, at whatever bracket your total household income lands in.
• State income tax, if your state has one, is another few percent.

Add those together and 25% is the floor for someone with modest profit, while 35% is realistic once you're earning well or your spouse's income pushes you up a bracket.

Set aside on income, not on profit

The technically correct thing is to tax your profit — income minus deductible expenses. The practically correct thing is to set aside a flat percentage of every payment as it comes in, because you don't know your profit until December and you can't spend money you've already moved.

Setting aside slightly too much is a refund. Setting aside slightly too little is a payment plan.

If you'd rather be precise, run the percentage against income minus your obvious recurring expenses — software, phone, insurance — and leave the fuzzy ones out of the math. You'll land close, and you'll land high rather than low.

Where the money should go

A separate savings account at the same bank, so the transfer takes ten seconds and the balance never shows up in your spending account. Not an investment account — you need this money on four fixed dates a year and you can't afford for it to be down 12% in April.

Move the money the same day the payment clears. Every system that depends on you doing it later fails, because later is when the invoice for something else arrives.

The four dates

US quarterly estimated payments are generally due April 15, June 15, September 15, and January 15 for the prior year's final quarter. They're uneven — that June date covers only two months — which catches people who assume it's every three months exactly.

Two things make a missed payment less painful than people fear: the penalty is closer to interest than a fine, and paying 100% of last year's tax bill across the four dates generally protects you even if this year turns out bigger. Ask your accountant about that safe harbor rule specifically — it's the most useful thing a freelancer with a volatile income can know.

Making it boring

The whole system is three habits: pick a percentage with your accountant, move that percentage the day you get paid, and log what you spent so your profit number is real. None of it is hard. All of it is easy to skip.

That's exactly what the Quarterly workbook does — you type in what you got paid and it tells you the dollar amount to move that week, so the decision is already made for you.