The single most common question new freelancers ask is some version of: "How much should I be putting in my tax savings account?" The most common answer — "25% to 30%" — is roughly right for a lot of people and dangerously wrong for others. Here's what the actual math looks like, and how to figure out the right number for your situation.
The Three Layers of 1099 Tax
When you receive a 1099, you owe three taxes the IRS doesn't withhold for you:
- Self-employment (SE) tax — 15.3% of 92.35% of your net business profit. This funds Social Security and Medicare. As a W-2 employee, your employer paid half. As a freelancer, you pay both halves.
- Federal income tax — 10% to 37% depending on your bracket, applied to your taxable income (after deductions and the SE-tax half-deduction).
- State income tax — 0% in nine states (TX, FL, NV, WY, SD, AK, WA, NH, TN), up to ~13% in California or New York.
Almost every "set aside this percent" rule of thumb fails because it ignores at least one of these layers, or assumes a state that isn't yours.
The Math, Layer by Layer
SE tax is the simplest. Take your net profit (revenue minus business expenses), multiply by 0.9235, then by 0.153. On $80,000 of net profit, SE tax is $11,304. Half of that ($5,652) is deductible on Schedule 1 — it doesn't reduce SE tax, but it lowers your federal income tax base.
Federal income tax uses 2026 brackets applied to your taxable income, which is roughly: net profit − ½ SE tax − standard deduction ($14,600 single, $29,200 MFJ) − any retirement contributions.
State income tax is its own table. Use your state's effective rate on roughly the same base.
The full IRS reference for SE tax is in Schedule SE instructions, and the federal brackets are published annually in Rev. Proc..
Real Numbers by Income Level (Single Filer, No State Tax)
These assume net Schedule C profit (after business expenses) for a single filer taking the standard deduction, no retirement contributions, no QBI complications, in a no-income-tax state.
$50,000 Net Profit
- SE tax: $7,065
- Half-SE deduction: $3,532
- Taxable income: $50,000 − $3,532 − $14,600 = $31,868
- Federal income tax: ~$3,581 (mostly 12% bracket)
- Total federal tax: ~$10,646
- Set aside: ~21% of net profit
$75,000 Net Profit
- SE tax: $10,597
- Half-SE deduction: $5,299
- Taxable income: $55,101
- Federal income tax: ~$7,591
- Total federal tax: ~$18,188
- Set aside: ~24%
$100,000 Net Profit
- SE tax: $14,130
- Half-SE deduction: $7,065
- Taxable income: $78,335
- Federal income tax: ~$12,839
- Total federal tax: ~$26,969
- Set aside: ~27%
$150,000 Net Profit
- SE tax: $21,194
- Half-SE deduction: $10,597
- Taxable income: $124,803
- Federal income tax: ~$23,956
- Total federal tax: ~$45,150
- Set aside: ~30%
Notice the trajectory: the percentage climbs as income grows because more of your income gets taxed at higher brackets. "Set aside 25%" is fine at $75k but leaves you short by April at $150k.
Add Your State on Top
If you're in a state with income tax, layer it directly on:
- Texas, Florida, Nevada, Washington: 0% — use the numbers above
- Colorado, Arizona, North Carolina: ~4-5% effective — add ~4-5 percentage points
- California, New York, New Jersey, Oregon: 6-10%+ effective — add 8-12 percentage points
A California freelancer netting $100,000 should be setting aside closer to 35-37%, not 27%.
What "Set Aside" Actually Means in Practice
Open a separate high-yield savings account. Every time a client pays you, transfer your set-aside percentage immediately, before you see the rest. Treat it like withholding — money you never had.
The set-aside isn't a rough guess for April. It's funding quarterly estimated tax payments that are due four times a year:
- Q1 (Jan–Mar income): due April 15
- Q2 (Apr–May): due June 16
- Q3 (Jun–Aug): due September 15
- Q4 (Sep–Dec): due January 15 of the next year
Miss those, and you owe an underpayment penalty (currently around 8% annualized) on top of the tax.
Adjust the Number for Your Reality
The percentages above assume no business expenses beyond what's already netted out, no retirement contributions, no kids, no spouse, standard deduction. You can lower your set-aside meaningfully with:
- A SEP-IRA or Solo 401(k): can shelter up to 25% of net SE earnings (or $69,000 in 2026) from federal income tax — though not SE tax.
- The QBI deduction (Section 199A): up to 20% off your qualified business income, subject to phase-outs starting at $241,950 single / $383,900 MFJ in 2026.
- The home office deduction, mileage, business meals, software, equipment — every legitimate expense reduces both SE tax and income tax.
The Right Way to Calculate It
Rules of thumb get you to "in the ballpark." For an actual number you can budget against, you need to plug your real income, state, deductions, and filing status into a calculator that handles all three tax layers together.
Try the SE Tax Calculator → — it computes your SE tax, half-deduction, and shows the math step by step.
Use the Quarterly Tax Calculator → to break your annual estimate into the four quarterly payments.
The Honest Bottom Line
For most full-time freelancers in a no-tax state, 25-30% of net profit is a defensible starting point. In a high-tax state, 32-38%. If you're earning above $150k, add another 3-5 points for the bracket creep. Then refine quarterly with actual numbers — not vibes.
The freelancers who get crushed every April aren't the ones who set aside too little once. They're the ones who set aside the same flat percentage for three years while their income doubled and their state tax obligations changed. Recalculate every January. Track quarterly. The system works if you let it.