How Much Should You Set Aside for Taxes When You're Self-Employed?

Most self-employed contractors should set aside about 20% to 30% of net profit for federal taxes, plus their state's income tax rate. The exact share depends on profit, filing status and deductions. Using 2026 IRS figures, a single owner with $90,000 of profit owes about $19,300 in federal income and self-employment tax, roughly 21%.

How much of your income should you save for taxes?

A practical starting point is 25% to 30% of net profit, adjusted for your state. That's a rule of thumb, not an IRS figure. It works because two federal taxes stack on a self-employed person's profit: self-employment tax of about 14.1% of profit, and federal income tax at whatever bracket your taxable income reaches. State income tax, if your state has one, comes on top.

Owners who set aside too little usually make one of two errors. They save a percentage of revenue that is too small, or they forget self-employment tax entirely because they're used to a W-2 paycheck where the employer paid half of it.

How the math works

Federal tax ≈ SE tax + income tax on (profit − ½ SE tax − standard deduction − QBI deduction)

How much to set aside at different profit levels

Two things jump out. First, at lower profit levels SE tax is most of the bill: on $50,000 of profit, SE tax is about $7,065 and income tax only about $2,667 for a single filer. Second, a spouse's W-2 wages change everything, because they fill the lower brackets before your profit does. If your household has other income, your set-aside percentage should be higher than this table.

Don't forget state income tax

Most states tax self-employment profit too, and a few don't tax wage income at all. Add your state's effective rate to the federal percentage above. Our state tax guides cover income tax, sales tax on labor and materials, and contractor licensing for each state. Some cities and counties add their own income or business taxes.

Set-aside percentage by trade: what changes the number

How to set money aside without thinking about it

1. 1

   Open a separate tax savings account.

   Keep it at a different bank from your operating account if you're tempted to dip into it.

2. 2

   Pick a percentage of profit.

   Start at 25% plus your state rate, or use the table above. If you can't compute profit weekly, use a percentage of deposits that matches your typical profit margin.

3. 3

   Transfer on every deposit.

   Each time a customer pays, move the percentage over. Weekly works if per-deposit is too fiddly.

4. 4

   Pay quarterly estimates from that account.

   The 2026 dates are April 15, June 15, September 15, 2026 and January 15, 2027. See quarterly estimated taxes.

5. 5

   Recalculate every quarter.

   Run the quarterly estimated tax calculator with year-to-date profit and adjust the percentage up or down.

Common mistakes

• Saving a percentage of revenue without knowing your margin. At a 40% profit margin, saving 25% of profit means saving 10% of revenue. Save 10% of revenue at a 60% margin and you're short by a third.
• Treating the tax account as a cushion for slow months. That money belongs to the IRS and your state.
• Forgetting deductions until April. Untracked deductions, like mileage and a home office, mean you pay more than you should.
• Assuming an S corp fixes it. An S corporation election can lower self-employment tax for some owners, but it adds payroll, a reasonable salary requirement and costs. See S corp vs. LLC for contractors and ask your CPA.

For year-round planning, read the contractor taxes guide and see how BRIX bookkeeping and tax help keeps the books ready for your CPA.