# 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%.

## Key takeaways

- Set aside a percentage of **profit**, not revenue. Materials, subs, fuel and other expenses come off first.
- Self-employment tax alone is about 14.1% of profit (15.3% × 92.35%) up to the 2026 Social Security wage base of $184,500.
- Using 2026 figures, federal tax on $50,000–$150,000 of profit runs roughly 16% to 25%, before state tax.
- Move the money into a separate tax savings account every time you get paid, then pay quarterly estimates from it.
- Big equipment purchases, retirement contributions and an S corporation election all change the right percentage. Ask your CPA to recalculate.

> **Which year these numbers are for**
>
> Examples use **tax year 2026** brackets, standard deduction and self-employment tax figures published by the IRS, checked October 12, 2026. They are simplified illustrations, not tax advice. A CPA or enrolled agent can work out your actual number.

## 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](https://www.brix.so/learn/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 on self-employment profit (simplified)**

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

Where:
- SE tax = 15.3% × (profit × 92.35%), with the 12.4% Social Security part capped at $184,500 of earnings for 2026
- ½ SE tax = half of your SE tax is deductible from income
- standard deduction = $16,100 single or $32,200 married filing jointly for 2026
- QBI deduction = generally up to 20% of qualified business income, limited by taxable income; see the QBI deduction page

> **Example: a plumber with $90,000 of profit**
>
> This is an illustrative example. Dave is a single plumber who files Schedule C. His 2026 revenue is $210,000 and his expenses (parts, fuel, insurance, tools, phone) are $120,000, so his **net profit is $90,000**. He has no other income.
>
> SE tax: $90,000 × 92.35% = $83,115 × 15.3% = **$12,716.60**. Half of that, $6,358.30, is deductible.
>
> Income tax: $90,000 − $6,358.30 − $16,100 standard deduction = $67,541.70. The QBI deduction is limited to 20% of that, $13,508.34, leaving taxable income of $54,033.36. Using the 2026 single brackets, income tax is **$6,599.34**.
>
> Total federal tax: about **$19,316, or 21.5% of profit**. If Dave saves 25% of each week's profit, he covers federal tax with a cushion for state tax or a better-than-expected year.

## How much to set aside at different profit levels

**Estimated 2026 federal tax on self-employment profit (illustrative)**

| Net profit | Single filer | Share of profit | Married filing jointly, no other income | Share of profit |
| --- | --- | --- | --- | --- |
| $50,000 | $9,732 | 19.5% | $8,206 | 16.4% |
| $90,000 | $19,316 | 21.5% | $17,159 | 19.1% |
| $150,000 | $37,608 | 25.1% | $30,990 | 20.7% |

_Computed with 2026 tax brackets and standard deduction (Rev. Proc. 2025-32) and 2026 SE tax rules (Form 1040-ES), assuming the standard deduction, the 20% QBI deduction, no other income, no credits and no retirement contributions. State and local income tax are not included. Your result will differ._

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](https://www.brix.so/taxes) 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

**What pushes your set-aside up or down, by trade**

| Trade | Common situation | Effect on set-aside |
| --- | --- | --- |
| HVAC | Buying a new service van or a big tool package | A vehicle over 6,000 lbs expensed under Section 179 or bonus depreciation can cut this year's tax sharply. Recalculate before the next estimate. |
| Plumbing | Steady service work, owner drives a lot | Mileage and tool deductions lower profit. Track them or you'll save too much and claim too little. |
| Roofing | Storm season windfall | One huge quarter can push profit into a higher bracket. Raise the percentage for that period. |
| Electrical | Hiring a first employee | Wages are deductible, but payroll taxes and workers' comp add cost. Profit, and tax, may drop. |
| Landscaping | Short, intense season | Save a higher share in peak months, because winter cash has to cover the January estimate. |
| Cleaning | Low equipment cost, high labor share | Fewer big deductions, so the percentage tends to stay close to the table. |

_Illustrative patterns, not measured data._

## How to set money aside without thinking about it

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. **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. **Transfer on every deposit.** Each time a customer pays, move the percentage over. Weekly works if per-deposit is too fiddly.
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](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors).
5. **Recalculate every quarter.** Run the [quarterly estimated tax calculator](https://www.brix.so/tools/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](https://www.brix.so/learn/contractor-tax-deductions-list), like [mileage](https://www.brix.so/learn/mileage-deduction-for-contractors) and a [home office](https://www.brix.so/learn/home-office-deduction-for-contractors), 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](https://www.brix.so/learn/s-corp-vs-llc-for-contractors) and ask your CPA.

BRIX tracks every invoice and payment, keeps expenses categorized and synced to QuickBooks, and reminds you before quarterly estimated tax dates, so you can see real profit, not a guess, when you move money to your tax account. BRIX does not file taxes or give tax advice.

- [Bookkeeping and tax help](https://www.brix.so/features/bookkeeping-taxes): Keeps expenses categorized, tracks 1099 subcontractors and sales tax, and reminds you of quarterly estimated tax dates. BRIX does not file taxes or give tax advice.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.
- [Invoicing and payments](https://www.brix.so/features/invoicing-payments): Turns finished jobs into invoices and politely chases unpaid ones until the money is in your account.

For year-round planning, read the [contractor taxes guide](https://www.brix.so/guides/contractor-taxes) and see how [BRIX bookkeeping and tax help](https://www.brix.so/features/bookkeeping-taxes) keeps the books ready for your CPA.

## Frequently asked questions

### What percentage should I set aside for taxes if I'm self-employed?

Many self-employed contractors save 25% to 30% of net profit, plus their state income tax rate. Using 2026 IRS figures, federal tax on $50,000 to $150,000 of profit for a single filer with no other income runs about 19% to 25%. Household income, deductions and credits move that number.

### Should I set aside taxes from revenue or profit?

From profit. Income tax and self-employment tax are figured on net profit after business expenses. If you can't calculate profit every week, set aside a percentage of deposits that matches your typical profit margin times your target tax rate.

### How much is self-employment tax in 2026?

Self-employment tax is 15.3% of 92.35% of your net earnings, about 14.1% of profit. The 12.4% Social Security part stops at $184,500 of earnings for 2026, while the 2.9% Medicare part has no cap. You can deduct half of it when figuring income tax.

### Is 30% too much to set aside for taxes?

Not if you live in a state with income tax or your household has other income. If you end up with extra, it becomes next year's cushion or a buffer for a big quarter. Saving too little costs you penalties and stress.

### Where should I keep money set aside for taxes?

In a separate savings account you don't use for operating costs. Some owners use a high-yield savings account so the money earns a little interest until each quarterly payment is due. Pay your estimates straight from it.

### Do I still need to save for taxes if I'm buying equipment this year?

Yes, but the right amount may be lower. Expensing a truck or machine under Section 179 or bonus depreciation reduces taxable profit. Ask your CPA to rerun your estimate after the purchase is placed in service, then adjust your remaining payments.

## Related

- [Quarterly Estimated Taxes for Contractors: How They Work in 2026](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors)
- [What Is Self-Employment Tax?](https://www.brix.so/learn/self-employment-tax)
- [Contractor Tax Deductions: The Complete List for 2026](https://www.brix.so/learn/contractor-tax-deductions-list)
- [What Is the QBI Deduction?](https://www.brix.so/learn/qbi-deduction)
- [S Corp vs. LLC for Contractors: Which Is Better?](https://www.brix.so/learn/s-corp-vs-llc-for-contractors)
- [Quarterly Estimated Tax Calculator for Self-Employed Contractors (2026)](https://www.brix.so/tools/quarterly-estimated-tax-calculator)
- [Self-Employment Tax Calculator (2026)](https://www.brix.so/tools/self-employment-tax-calculator)
- [Taxes for Contractors: The 2026 Guide for Self-Employed Trades Owners](https://www.brix.so/guides/contractor-taxes)
- [Bookkeeping for contractors that keeps your books tax-ready all year](https://www.brix.so/features/bookkeeping-taxes)
- [Mileage Deduction Calculator for Contractors (2026)](https://www.brix.so/tools/mileage-deduction-calculator)

## Sources

- [IRS: Rev. Proc. 2025-32 (2026 tax brackets, standard deduction, QBI thresholds)](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf) (checked 2026-10-12)
- [IRS: 2026 Form 1040-ES (SE tax worksheet, $184,500 wage base, due dates)](https://www.irs.gov/pub/irs-pdf/f1040es.pdf) (checked 2026-10-12)
- [IRS: Topic No. 554, Self-Employment Tax](https://www.irs.gov/taxtopics/tc554) (checked 2026-10-12)
- [IRS: Publication 334 (2025), Tax Guide for Small Business (QBI deduction made permanent)](https://www.irs.gov/pub/irs-pdf/p334.pdf) (checked 2026-10-12)
- [IRS: Publication 505 (2026), Tax Withholding and Estimated Tax](https://www.irs.gov/pub/irs-pdf/p505.pdf) (checked 2026-10-12)

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Written by BRIX Editorial Team. Last updated 2026-10-12. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/learn/how-much-to-set-aside-for-taxes