How much should I set aside for freelance taxes?
That first payment from a client feels amazing. You did the work, sent the invoice, and the money is in your account. But then a quiet, nagging thought creeps in: how much of this is actually mine?
If you’re self-employed, a freelancer, or have a side-hustle, you know that no one is withholding taxes for you. That entire invoice amount is your responsibility. Come tax time, you’ll owe a chunk of it back to the government for income tax and self-employment taxes (which cover Social Security and Medicare). Wait until the annual deadline, and you could face a scary bill and potential underpayment penalties.
The solution is to pay estimated taxes quarterly throughout the year. But that just leads to another question: how much do you send? It feels like guesswork, especially when your income fluctuates from month to month.
A simple starting point: the 30% rule
A common rule of thumb is to set aside 30% of your gross income for taxes. This isn’t a precise figure, as your actual tax rate depends on your total income, filing status, and deductions. But it’s a conservative, safe starting point that helps you avoid owing a huge amount later. For many freelancers, it’s better to over-save and get a refund than to under-save and be hit with a bill you can’t pay.
Let’s see what that looks like for a few recent projects. You can change any of the numbers in the live notepad below — the amountToSetAside will update automatically.
Seeing that amountToSetAside number can be a bit of a shock. It’s a significant portion of your hard-earned income. But the discipline of moving that money into a separate savings account immediately after getting paid is one of the most important financial habits a freelancer can build.
From a percentage to a quarterly payment
Saving a percentage is the first step. The next is figuring out what to send to the IRS each quarter. The deadlines are typically April 15, June 15, September 15, and January 15 of the next year.
To calculate your payment, you just add up all the income for that period and find your set-aside amount. Let’s say in the first quarter (Jan-Mar), you had the income from above, plus one more small project.
Here’s the math, live — try adding another line for a new project or changing the taxRate percentage to see how it affects the total payment.
This calculation isn’t a replacement for professional tax advice, of course. A good accountant can help you factor in business expenses, deductions, and other income sources to get a much more accurate number. But for a quick, back-of-the-napkin estimate to keep you on track, this method provides peace of mind.
Sketching this out in a simple notepad, or here in CalNote, makes it easy to see where you stand. You can create a new note for each quarter, track your income as it comes in, and feel confident you’re prepared when the payment deadline rolls around. No more April surprises.