How Much to Set Aside for Taxes as a Freelancer
Your first freelance year usually comes with a surprise: nobody is withholding taxes for you anymore, and the IRS still wants its cut four times a year. If you've ever stared at a client payment and wondered how much of it is actually yours to keep, this one's for you.
Key Takeaways
- Set aside 25-30% of every freelance payment in a separate savings account the day it lands.
- Pay estimated taxes quarterly, not once a year, to avoid IRS underpayment penalties.
- Adjust your percentage upward if you live in a high-tax state or your income jumps mid-year.
- Mark April 15, June 15, September 15, and January 15 on your calendar now.
- Use a running estimate tool instead of guessing, especially once your income becomes less predictable.
Why Freelancers Owe Quarterly Taxes
When you had a regular job, your employer took out taxes before your paycheck ever hit your bank account. As a freelancer, that job is now yours.
FAQ
How much should I save for taxes as a freelancer?
A good starting point is 25-30% of every payment, moved to a separate savings account right away. Adjust upward if you live in a high-tax state, have a high-earning year, or file jointly with a spouse who also has income.
… and four more questions.