How Much to Set Aside for Taxes as a Freelancer in 2026

How much to set aside for taxes as a freelancer

Freelancers set aside 18% to 31% of net profit for federal taxes in 2026, from $30,000 to $200,000 of profit, based on IRS 2026 tax brackets and the 15.3% self-employment tax, applied to rates built from 150,000+ Bureau of Labor Statistics wage records across 391 US metro areas. State income tax adds more, except in states such as Texas and Florida with no income tax.

Setting aside 30% of every payment covers federal tax at every profit level up to about $150,000, with room left for state tax at lower incomes. The table below shows the exact split, and the tax set-aside calculator adds a state rate and business expenses.

How much to set aside for taxes, by income level

Self-employment tax is the larger share of the set-aside up to $100,000 of profit, and income tax takes over above it. At $50,000, self-employment tax is $7,065 and federal income tax $3,396; at $200,000, income tax reaches $33,346 against $28,234 of self-employment tax.

The percentage climbs slowly because two rules pull against it. Half of self-employment tax is deductible, and the Social Security part of the tax stops at $184,500 of combined earnings in 2026, per IRS Publication 15. The table leaves out the qualified business income deduction, which can lower income tax further for eligible freelancers. The formula behind every row comes next.

How to calculate your self-employment tax set-aside

Self-employment tax is 15.3% of 92.35% of net profit, made up of 12.4% for Social Security and 2.9% for Medicare, according to IRS Tax Topic 554. On $75,000 of profit, $69,263 is taxed at 15.3%, for $10,597.

Federal income tax comes second. Subtract half of the self-employment tax and the $16,100 standard deduction from profit, then apply the 2026 brackets: 10% up to $12,400 of taxable income, 12% up to $50,400, 22% up to $105,700, and 24% up to $201,775, per the IRS tax year 2026 inflation adjustments. On $75,000 of profit, taxable income is $53,601 and income tax is $6,504.

Add the two, $17,101, and divide by profit for the set-aside: 23%. Two rules change the math at higher incomes: an Additional Medicare Tax of 0.9% on self-employment income above $200,000 for single filers, and no Social Security tax on earnings above the wage base. Anyone with $400 or more of net self-employment earnings owes the tax, and the percentage only protects a freelancer if the money moves on schedule.

When to pay: 2026 estimated tax deadlines

Estimated tax payments for 2026 are due April 15, 2026, June 15, 2026, September 15, 2026, and January 15, 2027, according to IRS Form 1040-ES. Payments are required once a freelancer expects to owe $1,000 or more in tax for the year.

A set-aside account turns each deadline into a transfer instead of a scramble. A freelancer with $75,000 of profit pays about $4,275 each quarter from money already moved aside.

Paying at least 100% of last year's tax across the four installments, or 110% when last year's adjusted gross income topped $150,000, avoids an underpayment penalty even if this year's income jumps, per the same form. The bigger question is what all of this tax does to the rate a freelancer charges.

What tax does to your freelance rate

Taxes leave a freelancer with less take-home pay than an employee earning the same amount, because the freelancer pays both halves of Social Security and Medicare. $100,000 of profit leaves $74,254 after federal tax, while an employee on a $100,000 salary pays the employee share of payroll tax only, 7.65% instead of 15.3%, per IRS Publication 15.

That gap is why a freelance rate has to start from a pre-tax income target. A $70,000 take-home goal needs about $94,000 of profit once 2026 federal tax is paid, and $94,000 spread across 1,100 billable hours is $85.45 an hour before business expenses. WhatShouldICharge's floor rate grosses up for the 15.3% self-employment tax only, so income tax sits on top of it.

The page on how the floor rate works shows the full formula, and tax sits on top of every line in what freelancing actually costs. Seen from the client's side of the invoice, the same tax looks very different.

Why a freelancer's rate carries the tax an employer would pay

Businesses paying a freelancer's invoice skip the employer share of payroll tax, 7.65% of wages, which the freelancer pays instead through self-employment tax. On a $100,000 engagement, that moves $7,650 of payroll tax from the client's books to the freelancer's.

That shift is part of why a freelance hourly rate sits well above an employee's hourly wage for similar work. A client comparing an $85 freelance rate with a $35 wage is also comparing who pays payroll tax, health insurance, and paid leave. Private-industry employers spend $3.40 an hour on legally required benefits such as Social Security and Medicare, and 30.0% of total compensation on all benefits, according to Bureau of Labor Statistics compensation cost data. A freelancer's rate carries every one of those costs. The last question is how much of it can be kept.

What nobody tells you about freelance taxes

Freelance tax refunds come from overpaying during the year, not from anything clever at filing time. A freelancer who sets aside and pays 30% on $50,000 of profit overpays federal tax by about $4,539, which returns months later as a refund with no interest.

Deductions lower the set-aside itself. Every $1,000 of deductible business expense saves about $141 of self-employment tax, plus income tax at the marginal rate, and the list of freelance expenses you can write off covers what qualifies.

Retirement contributions are the largest lever. A SEP-IRA contribution of up to 25% of compensation, capped at $72,000 for 2026, with the self-employed rate working out to about 20% of net earnings, according to IRS Publication 560, lowers income tax in the year it's made, though not self-employment tax. The questions below cover the percentages and refunds freelancers ask about most.