Handbook / Estimated tax

How much to set aside for taxes when self-employed in the 2026 tax year

Tax-year note: Tax information on this page applies to the 2026 tax year (returns filed in 2027), from IRS pages checked in November 2026. Figures and dates are labelled with their tax year where they appear. Check current IRS pages before you rely on them.

Nobody withholds tax from self-employment income, so you have to do it yourself. The most common money problem for new self-employed people is reaching April with a tax bill and no cash to pay it. The fix is a set-aside percentage based on your own numbers. This guide shows how to calculate one for the 2026 tax year.

The pieces of your tax bill

Your tax on self-employment income usually has three or four parts:

1. Self-employment tax for Social Security and Medicare.
2. Federal income tax.
3. State income tax, where your state has one.
4. Local income tax in some cities and counties.

Step 1: estimate your profit

Taxes are based on net profit, not revenue. Use your profit and loss statement for the year so far and project to year end. If your income varies, use a cautious estimate.

Step 2: self-employment tax

According to the IRS, the self-employment tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of your net earnings from self-employment. The Social Security portion applies only up to the wage base, which the Social Security Administration lists as $184,500 for 2026. You generally owe self-employment tax if net earnings are $400 or more.

A quick estimate: multiply net profit by 92.35%, then by 15.3%. On profit of $50,000, that is about $7,065. Higher earners can owe an Additional Medicare Tax of 0.9% above certain thresholds.

You can deduct half of your self-employment tax when calculating income tax, which slightly reduces the income tax part.

Step 3: federal income tax

Income tax depends on your total income, filing status, deductions and credits. The 2026 Form 1040-ES includes a worksheet and the 2026 tax rate schedules to estimate it. Some people qualify for deductions that reduce taxable business income, such as the qualified business income deduction; a tax professional or software can include these.

If you also have wages or a spouse's income, add them in. Self-employment profit is taxed on top, often at your highest rate.

Step 4: state and local tax

Check your state revenue department's estimated tax guidance. Rates and rules vary widely, and a few states have no income tax.

Step 5: turn it into a percentage

Add your estimated taxes together and divide by your expected revenue, not profit, to get a percentage you can apply to every payment you receive. For example, if you expect revenue of $80,000, profit of $60,000 and total tax of $16,000, setting aside 20% of every payment covers it.

Round up rather than down. A small surplus is better than a shortfall.

Step 6: automate it

• Open a separate savings account for tax.
• Every time a client pays, move your percentage across.
• Many banks can do this automatically.
• Do not dip into it for other expenses.

Step 7: pay estimated tax

The IRS generally expects estimated payments if you expect to owe $1,000 or more after withholding and credits. For the 2026 tax year, the Form 1040-ES due dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Your tax account funds these payments. The guide to Form 1040-ES explains how to pay, and the safe harbor rules explain how to avoid penalties when income is hard to predict.

Recheck each quarter

Before each payment date, update your profit estimate. If income rose, increase the percentage or the payment. If it fell, you may be able to reduce them.

Common mistakes

• using a rule-of-thumb percentage without checking
• forgetting self-employment tax and planning only for income tax
• forgetting state tax
• treating the tax account as an emergency fund

A worked example

Here is the method for a hypothetical freelancer expecting $70,000 of revenue and $10,000 of expenses in the 2026 tax year:

1. Net profit: $60,000.
2. Self-employment tax: $60,000 × 92.35% × 15.3% ≈ $8,478.
3. Federal income tax: estimated with the Form 1040-ES worksheet, using filing status, deductions and the deduction for half of self-employment tax.
4. State income tax: from the state's estimated tax guidance.
5. Add the three and divide by $70,000 to get the percentage to move aside from each payment.

The figures here are only an illustration of the steps, not a recommended percentage. Your own result depends on your profit, other income and state.

For the 2026 tax year, calculate self-employment tax at 15.3% of 92.35% of profit, add income and state tax, convert it to a percentage of revenue, move it aside automatically, and recheck every quarter.