How much should a freelancer set aside for taxes?
Most answers to this question are a single number — "save 30%" — that treats a freelancer clearing $20,000 and one clearing $200,000 identically. They shouldn't set aside the same percentage, and this is the math for why.
Where the flat 30% rule breaks
It's not wrong, exactly — it's a rough average across a range where the real answer moves in one direction the whole time.
A freelancer who sets aside a flat 30% of profit every quarter, no matter how much they made, will very often be wrong in a specific, predictable direction. At low profit — under roughly $30,000 for a single filer — 30% oversaves, sometimes by five or more points, because the standard deduction and the lower income-tax brackets haven't been factored in. At high profit — above roughly $150,000 for a single filer, lower for a married couple filing jointly with other income — 30% can undersave, because the marginal income-tax rate has climbed past where a flat 30% covers both taxes.
The rule survives because it's close enough in the middle of the range, which is where a lot of freelance advice gets written from. It stops being close enough at either end, and the gap compounds every quarter it goes uncorrected.
The two taxes stacked on 1099 profit
This is the tax most freelancers underestimate, because nothing about it looks like "income tax" on a pay stub they've seen before. It applies from the first dollar of profit — there's no zero-rate bracket the way income tax has one — and it's calculated before the standard deduction or any income-tax bracket even enters the picture.
Income tax stacks on top, at the graduated federal rates (10% through 37%), applied to profit after the standard deduction, half of the self-employment tax (a built-in adjustment that softens the SE-tax hit slightly), and the QBI deduction. This is the part that behaves the way most people expect "tax brackets" to behave — low or zero at low income, climbing steadily from there.
The real set-aside percentage, by profit level
Figures are federal only, for a single filer with no other income, using 2026 brackets and the standard deduction, before state tax. Add your state's rate on top — a flat 5% state tax adds roughly 5 points to every row above.
The pattern is a steady climb, not a jump: self-employment tax is a near-flat 14.13% of profit at every level (it only tapers slightly once profit clears the Social Security wage base), while income tax starts near zero and climbs with profit. The combined percentage is really just "14% plus a growing income-tax number," which is why a single flat percentage can never fit the whole range.
Revenue vs. profit: a common, expensive mix-up
Every percentage above applies to profit — revenue minus deductible business expenses — never to gross revenue. Setting aside 25% of $80,000 in revenue ($20,000) when real expenses (software, equipment, a home-office deduction, mileage, contractor payments) bring profit down to $55,000 means setting aside roughly $6,000 more than actually owed. That money isn't lost, but it's sitting idle in a tax account instead of earning interest or funding the business, for months at a time, purely from calculating the set-aside off the wrong base number.
The fix is a two-step habit, not a two-step calculation: track expenses as they happen through the year (not just at filing time), and calculate the set-aside percentage against updated year-to-date profit each quarter, not a guess made in January.
How a W-2 job changes the math
Freelancing on the side of a W-2 job moves the set-aside percentage in two different directions at once, which is exactly why it's easy to get wrong. Self-employment tax can end up lower than the single-income table above, because W-2 wages already use up part of the annual Social Security wage base — once combined W-2 wages and 1099 profit pass that cap, the Social Security portion of self-employment tax stops applying to the excess.
Income tax, on the other hand, usually runs higher than the single-income table, because the 1099 profit stacks on top of the W-2 salary at your marginal rate instead of starting from a $0 baseline with its own standard deduction. A freelancer earning $25,000 in 1099 profit on top of a $70,000 W-2 salary pays income tax on that $25,000 at roughly the 22% bracket, not the 12% bracket a standalone $25,000 profit would mostly sit in.
Net effect: side-income freelancers generally need a higher set-aside percentage than the single-income table suggests for the same profit amount, not lower, because the income-tax effect usually outweighs the smaller Social Security saving.
The QBI deduction, and why it only helps half the bill
The qualified business income (QBI) deduction knocks up to 20% off qualifying pass-through profit before income-tax brackets apply — a real, meaningful reduction, and one reason the income-tax column above grows more slowly than a naive bracket calculation would suggest. The catch: QBI applies only to the income-tax side of the bill. Self-employment tax is calculated on the full profit figure, with no QBI adjustment at all, so a freelancer can't apply the 20% discount to the self-employment tax portion of their set-aside, even though it's usually the larger of the two taxes at low-to-mid profit levels.
A full worked example
A single graphic designer nets $68,000 in 1099 profit for the year, no other income. Self-employment tax: 92.35% × $68,000 = $62,798, × 15.3% = $9,608. Half of that, $4,804, is deductible against income tax.
Taxable income for the income-tax calculation: $68,000 profit − $4,804 (half-SE deduction) − $16,100 (2026 single standard deduction) − QBI deduction (20% of qualifying business income, roughly $9,300 here after the other adjustments) ≈ $37,796. At 2026 single brackets, tax on that comes to roughly $4,320.
Total federal tax: $9,608 (SE) + $4,320 (income) = $13,928, or about 20.5% of the $68,000 profit — noticeably under the "flat 30%" rule, and a concrete example of how much that rule oversaves in the low-to-mid range once the standard deduction and QBI are actually applied.
Where to actually put the money
Move the set-aside percentage the moment income arrives, not at quarter-end from memory — a percentage calculated after money has already been spent tends to come up short.
Money sitting for up to a full quarter before its estimated-tax due date earns real interest in a high-yield account, at effectively zero risk, since the balance is needed on a known, fixed date.
Set-aside money still has to leave on the quarterly estimated tax schedule to avoid an underpayment penalty. See the quarterly estimated tax calculator for the actual due dates and the safe-harbor rule that determines how much of it is required, versus simply advisable.
Run your own numbers through the 1099 tax calculator for a precise set-aside percentage at your actual profit and filing status, rather than reading it off the table above — the table is a guide to the shape of the curve, not a substitute for your specific numbers.
Frequently asked questions
There's no single correct percentage — it depends on your profit level and filing status, because self-employment tax is a flat rate but income tax is graduated. A single freelancer with no other income should set aside roughly 15-18% at low profit levels, climbing to 25-30% as profit passes $60,000-$80,000. The commonly cited flat '30%' rule is a reasonable default only in that middle range; it overshoots badly at low income and can undershoot at high income once state tax is added.
From profit — revenue minus business expenses. Setting aside a percentage of gross revenue overstates what you actually owe, sometimes dramatically, for a freelancer with real deductible expenses (equipment, software, a home office, mileage). Calculate profit first, then apply the set-aside percentage to that number.
Because it's a flat 15.3% (effectively about 14.13% of profit, after the built-in adjustment) starting from the first dollar of profit, with no bracket structure — unlike income tax, which starts at 0% and 10% before climbing. At low profit levels, self-employment tax is often the larger of the two taxes, which surprises freelancers who only budgeted for 'income tax.'
Yes, for the income tax portion — the qualified business income deduction shaves up to 20% off qualifying pass-through profit before income tax brackets apply. It does not reduce self-employment tax, which is calculated on the full profit figure before the QBI deduction is applied. Factor it in only on the income-tax side of the set-aside calculation.
Usually less than a freelancer with no other income, at the same 1099 profit level — W-2 wages use up some of the Social Security wage base, which can lower the self-employment tax due on the 1099 profit once combined income passes the annual cap. Income tax, on the other hand, often runs higher, because the 1099 profit stacks on top of the W-2 income at your marginal rate rather than starting from zero.
See the 1099 tax calculator and the quarterly estimated tax calculator for the exact numbers behind everything on this page.
Glossary:1099-NEC,Estimated Tax