"Just set aside 30%" is the most common freelance tax advice out there, and it's wrong for almost everyone who follows it literally — the real number depends on how much you actually make and what tax bracket that lands you in. This calculator replaces the flat rule of thumb with your own numbers: your expected net profit for the year and your own income-tax rate estimate, combined into a single set-aside percentage you can apply to every invoice as it lands.
How it works
The calculator starts with self-employment tax, using the same Schedule SE mechanics as this site's Self-Employment Tax Calculator: your net profit taxed at 92.35%, then split into 12.4% for Social Security (capped at the annual wage base) and 2.9% for Medicare (uncapped). It also pulls the deductible half of that SE tax — the amount you get to subtract from your income before income tax applies, claimed on Schedule 1.
From there it estimates income tax by taking your net profit, subtracting that deductible half, and applying the income-tax rate you supply. That income-tax estimate gets added to self-employment tax for your total estimated annual tax. Dividing the total by your net profit gives the set-aside percentage — the share of every dollar of profit that should go toward taxes rather than your pocket. Multiply that percentage by any single invoice amount and you get a concrete dollar figure to transfer into a tax savings account the moment that invoice gets paid.
If your net profit is zero, the calculator does not attempt to divide by it — the set-aside percentage and per-invoice amount both fall to zero rather than throwing an error or showing a meaningless result.
Worked example
Say you expect $80,000 in net profit this year, you estimate a 22% combined federal and state income-tax rate, and you just got paid a $5,000 invoice.
- Self-employment tax on $80,000: $11,303.64
- Deductible half of that SE tax: $5,651.82
- Income tax: ($80,000 − $5,651.82) × 22% = $16,356.60
- Total estimated annual tax: $11,303.64 + $16,356.60 = $27,660.24
- Set-aside percent: $27,660.24 ÷ $80,000 = 34.58%
- Set aside from this invoice: $5,000 × 34.58% = $1,729
Of that $5,000 invoice, $1,729 is really the government's money the moment it lands — moving it to a separate savings account as soon as you're paid means April (and each quarterly deadline before it) never comes as a surprise.
How to interpret your result
The set-aside percentage is the headline number: it's what to skim off the top of every dollar of freelance income, not just this one invoice. Because it blends a tax that only applies above 92.35% of profit (self-employment tax, with its Social Security cap) with a flat rate you're applying to your whole profit (income tax), the percentage will drift as your net profit changes over the year — a small early-year invoice and a large late-year one won't necessarily carry the exact same rate if your total profit picture shifts. Treat the percentage as accurate for the net profit figure you entered, and re-run it if your income outlook changes materially.
The total estimated annual tax is a planning number for your own budgeting, not a quarterly payment schedule — pair it with this site's Quarterly Tax Calculator if you need to know what to actually send the IRS each period, and check the safe-harbor rules before relying on either tool to avoid an underpayment penalty.
Methodology & sources
Self-employment tax follows IRS Schedule SE mechanics: net profit × 92.35% is the taxable base, taxed at 12.4% for Social Security (capped at the annual wage base) plus 2.9% for Medicare (uncapped), rounded to the cent. The deductible half is 50% of that total, per the deduction for one-half of self-employment tax claimed on Schedule 1. Income tax here is a simplified estimate: (net profit − deductible half) × your supplied income-tax rate — it does not model federal or state tax brackets, standard vs. itemized deductions, filing status, or the Qualified Business Income (QBI) deduction. Total estimated annual tax is self-employment tax plus that income-tax estimate; the set-aside percentage is the total divided by net profit.
See the IRS's Self-Employment Tax (Social Security and Medicare Taxes) page for the underlying SE tax rules, including the current-year Social Security wage base, and Estimated Taxes for how self-employed taxpayers are expected to pay throughout the year rather than in one lump sum. This tool covers US federal tax only — no state income tax, no brackets, no QBI deduction — and the income-tax rate you enter is your own estimate, not one this calculator derives. It is not personalized tax advice; verify against a tax professional or the IRS's own instructions before relying on it to plan cash flow or avoid a penalty.