Reviewed September 2026.
Many U.S. freelancers set aside about 25–35% of net profit for federal income tax, self-employment tax, and a cushion for state tax. That is a planning rule of thumb, not a personalized rate. Your real number depends on profit, filing status, deductions, and whether you already have W-2 withholding from a day job.
Start with the income-type contrast in W-2 vs 1099 tax basics, then use How to estimate quarterly estimated taxes for payment timing. This guide is education, not tax advice.
Why freelancers need a set-aside
On a W-2 job, your employer withholds income tax and Social Security/Medicare. On 1099 freelance income, nobody withholds by default. You generally owe:
- Income tax on taxable profit
- Self-employment tax (Social Security and Medicare on net earnings from self-employment; see Self-employment tax basics)
- State income tax where it applies
Quarterly estimated payments (Form 1040-ES style timing) exist so you do not wait until April with an empty checking account. Side-hustle specifics: Side hustle quarterly taxes.
A practical set-aside range
| Situation | Common set-aside habit |
|---|---|
| Low profit, some W-2 withholding already | Often 20–25% of freelance net |
| Full-time freelance, mid brackets, no withholdings | Often 25–30% of net |
| Higher profit or high-tax state | Often 30–35%+ until you refine with software or a preparer |
“Net” here means revenue minus ordinary business expenses you will actually claim, not every dollar that hits Stripe.
Worked example
Priya clears $4,000 net profit in a month (after software, contractor expenses, and payment fees). She moves 30% ($1,200) the same week into a separate savings label “taxes.” Across a quarter with three similar months, she has $3,600 ready before the estimated payment date. She still reconciles with a real estimate using last year’s return and safe harbor rules so she is not blindly wired to a round percentage forever.
Separate the money operationally
- Open or label a savings account only for tax set-asides.
- Transfer the percentage on every inbound payment week (Automatic savings transfers help when income is lumpy).
- Budget living expenses from what remains (Budgeting for irregular income).
- Recalculate after a big expense year or a move across state lines (Filing taxes for beginners).
Checklist
- Track revenue and expenses monthly (even a simple spreadsheet).
- Pick a starting set-aside % and automate the transfer.
- Calendar federal quarterly due dates; add state dates if needed.
- Compare set-asides to a draft estimated-tax worksheet midyear.
- Adjust the % after you file once with full-year numbers.
Educational only. Not tax, legal, or accounting advice. IRS and state rules change; confirm with IRS.gov, state instructions, or a qualified tax professional.