Quick Answer
Most freelancers should save 25-30% of their gross income for taxes. This covers federal income tax, self-employment tax, and state taxes. Higher earners may need to save 35-40%.
The Complete Breakdown
Federal Income Tax (10-37%)
Your federal income tax rate depends on your total taxable income:
- 10%: Income up to $11,000 (single) / $22,000 (married)
- 12%: $11,001 - $44,725 (single) / $22,001 - $89,450 (married)
- 22%: $44,726 - $95,375 (single) / $89,451 - $190,750 (married)
- 24%: $95,376 - $182,050 (single) / $190,751 - $364,200 (married)
Self-Employment Tax (15.3%)
All freelancers pay self-employment tax on their net earnings:
- Social Security: 12.4% (on income up to $168,600)
- Medicare: 2.9% (no income limit)
- Additional Medicare: 0.9% (on income over $200,000)
State Income Tax (0-13.3%)
State tax rates vary significantly:
- No state tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
- Low rates (1-5%): Most states
- High rates (6-13.3%): California, New York, New Jersey, Hawaii
Savings Rate by Income Level
| Annual Income | Recommended Savings Rate | Example Amount |
|---|---|---|
| $25,000 | 25% | $6,250 |
| $50,000 | 28% | $14,000 |
| $75,000 | 30% | $22,500 |
| $100,000 | 32% | $32,000 |
| $150,000+ | 35-40% | $52,500+ |
Quarterly Payment Strategy
When to Make Quarterly Payments
You should make quarterly estimated tax payments if you expect to owe $1,000 or more in taxes for the year.
2025 Quarterly Due Dates
- Q1 2025: April 15, 2025
- Q2 2025: June 16, 2025
- Q3 2025: September 15, 2025
- Q4 2025: January 15, 2026
How Much to Pay Each Quarter
Two safe approaches:
- Current Year Method: Pay 25% of your estimated annual tax liability each quarter
- Safe Harbor Method: Pay 100% of last year's tax liability (110% if you earned over $150,000)
Practical Savings Strategies
1. Separate Tax Savings Account
- Open a dedicated savings account for taxes
- Transfer your savings percentage immediately when paid
- Consider a high-yield savings account to earn interest
- Don't touch this money except for tax payments
2. Automate Your Savings
- Set up automatic transfers when you receive payments
- Use apps like Qapital or Digit for automatic savings
- Consider using a business checking account with automatic transfers
3. Track Your Effective Tax Rate
- Calculate your actual tax rate after your first year
- Adjust your savings rate based on real data
- Account for deductions that reduce your tax liability
Factors That Affect Your Savings Rate
Business Deductions
More deductions = lower tax liability = lower savings rate needed:
- Home office expenses
- Business equipment and software
- Professional development and training
- Marketing and advertising costs
- Business insurance and licenses
Business Structure
- Sole Proprietor: Full self-employment tax on all income
- LLC: Same as sole proprietor for tax purposes
- S-Corp: Potential self-employment tax savings on distributions
Other Income Sources
- W-2 employment (taxes already withheld)
- Investment income
- Rental income
- Spouse's income (affects tax brackets)
Common Mistakes to Avoid
- Saving too little: Better to save too much than face penalties
- Mixing business and personal funds: Keep tax savings separate
- Forgetting state taxes: Don't overlook state tax obligations
- Not adjusting for deductions: Track deductions to refine your rate
- Missing quarterly deadlines: Late payments incur penalties
Sample Calculation
Example: Sarah's Freelance Writing Business
Annual Income: $60,000
Business Deductions: $8,000
Net Income: $52,000
Tax Calculation:
- Self-Employment Tax: $52,000 × 15.3% = $7,956
- Federal Income Tax: ~$4,200 (after standard deduction)
- State Tax (5% rate): $52,000 × 5% = $2,600
- Total Tax Liability: $14,756
Effective Tax Rate: $14,756 ÷ $60,000 = 24.6%
Recommended Savings Rate: 28% (includes buffer)
Amount to Save: $60,000 × 28% = $16,800
Tools and Resources
Tax Calculators
- TaxFix Tax Calculator - Gig worker specific
- IRS Estimated Tax Worksheet
- State tax department calculators
Savings Apps
- Qapital - Automatic savings
- Digit - AI-powered savings
- YNAB - Budgeting and tax planning
Professional Help
Consider professional help if you:
- Earn more than $75,000 annually
- Have multiple income streams
- Want to optimize your business structure
- Need help with quarterly planning
Get Personalized Tax Planning
Every freelancer's situation is unique. Our tax professionals can help you determine the exact amount you should save and create a quarterly payment plan.