Self-employed

How to Set Aside Money for Taxes When You're Self-Employed

Updated October 9, 2026

Move a share of every payment into a separate tax account the day it arrives. Build that share from two parts: self-employment tax, about 14 cents per dollar of profit (15.3% on 92.35% of net earnings), plus the income tax you personally owe. Last year's return is your best guide to the second part.

Why the money has to be moved on purpose

With a job, tax comes out of each check before you see it. When you work for yourself, the full payment lands in your account, and nothing marks which part belongs to the government. That is how a good year turns into a spring bill nobody saved for.

The fix is a habit, not a formula. Pick a share, move it the day money arrives, and treat that account as off limits. The rest of this guide covers how to pick the share and where to keep it.

Build your share from two pieces

Piece one is self-employment tax. It is 12.4% for Social Security plus 2.9% for Medicare, 15.3% in all, and it applies to 92.35% of your net earnings. Multiply those and you get about 14.1%, or roughly 14 cents per dollar of profit. The Social Security part stops at a yearly earnings limit that changes every year. Our self-employment tax guide goes deeper.

Piece two is income tax. It depends on your bracket, your deductions and any other income, so no single number fits everyone. You can deduct half of your self-employment tax, which trims it a little. Florida has no personal income tax, so Florida residents add no state piece.

To find your own number for piece two, open last year's return. Divide your income tax, not counting self-employment tax, by the income it was based on. Treat the result as a floor and round up, because the rate on added dollars is usually higher than your overall average. That is a more personal starting point than a general rule of thumb, and a preparer can run it forward with your real figures.

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A worked example with made-up numbers

Say a job leaves you with $1,000 of profit after costs. This is an illustration, not your tax.

Self-employment tax: $1,000 times 92.35% times 15.3% is about $141.
Half of that, about $71, is deductible. That leaves about $929 to carry into income tax.
Pretend last year's return shows income tax of 10 cents per dollar. On $929, that is about $93.
Total: about $234, or roughly 23 cents of each profit dollar.

Change the pretend income tax rate and the total moves with it. At 20 cents per dollar, income tax on $929 is about $186 and the total is about $327. The self-employment piece is the steady part. The income tax piece is the part to personalize.

Notice the base is profit, not sales. If a client pays $2,000 and the job cost you $600 in supplies, your share applies to the $1,400 left.

Three habits that make saving automatic

Keep a separate savings account. Money you do not see in your spending account is harder to spend. An account at a different institution adds a little more distance.
Apply your share to every deposit. That includes cash, card payments and tips from customers. All of it counts as income.
Check each quarter. Before every estimated payment, compare your year-to-date profit with what you assumed and adjust the percentage. Monthly bookkeeping makes that check quick, since your profit figure is already worked out.

Use last year's tax as your floor

The IRS says most people avoid the underpayment penalty if they owe less than $1,000 after withholding and credits, or if they pay at least the smaller of 90% of this year's tax or 100% of last year's tax. When adjusted gross income last year was over $150,000 ($75,000 if married filing separately), the last-year test uses 110%.

The last-year test gives you a number you can know today. Say last year's total tax was $8,000 and your adjusted gross income was $150,000 or less. Four equal payments of $2,000 would meet that test. The IRS advises paying in four equal amounts, and the law sets each installment at 25% of the required annual payment.

This floor protects you from the penalty. It does not cap what you owe. If this year turns out better than last, the difference is due with your return, so let your savings grow past the floor.

The payment dates are April 15, June 15, September 15 and the following January 15. After September, the only 2026 payment left is January 15, 2027. The January payment guide walks through it, and the estimated tax overview covers the full year.

How to pay once you have saved

Direct Pay on irs.gov takes the payment from your bank account at no charge, and estimated tax is one of its payment reasons. You can also pay through your IRS online account or the IRS app, or mail a Form 1040-ES voucher. Save the confirmation each time, because your return needs the date and amount of every payment.

Florida has no personal income tax, so there are no state payments to schedule. If you also earn income in a state that taxes it, check that state's rules.

Who this fits and what to gather

This method fits freelancers, gig workers, contractors and owners who are paid on a 1099 or by customers with nothing withheld. Bring these to your preparer:

Last year's return
Income and expense totals for this year so far
The date and amount of each estimated payment you have made
Your 1099 forms and a note of any cash income
The balance in your tax savings account

A self-employed return with us starts at $450, with the final fee set in a free quote plus e-file and processing fees. Try the quote calculator, read the self-employed checklist, or start your return and we will help you set a number that fits your year.

FAQ

How much of each payment should I save for taxes?

There is no single answer. Start with about 14 cents of each profit dollar for self-employment tax, then add your own income tax share from last year's return, rounded up. Adjust after your next estimated payment. A preparer can set the figure from your real numbers.

Do I save from sales or from profit?

Profit. Tax applies to what is left after business costs. If you cannot tell a job's costs yet, save from the whole deposit and adjust at your next quarterly check. Saving a little too much is easier to fix than saving too little.

What if my income changes a lot from month to month?

Save the same share of every deposit, so strong months build a cushion for slow ones. Check year-to-date profit before each estimated payment. Last year's tax also gives you a steady fallback amount when income is hard to predict.

Do I still save if I have a W-2 job too?

Usually yes. Your employer withholds from wages, but nobody withholds from side income, and self-employment tax applies once net earnings from self-employment reach $400. Estimated payments are the usual route. Ask your preparer whether adjusting your paycheck withholding also makes sense for you.

Sources

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General information, not tax advice for your specific situation. Rules can change, and a human preparer reviews your facts before any return is filed. Zero Fuss Taxes is a PTIN-holding tax preparation firm. We are not a CPA firm, enrolled agents or attorneys.

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Zero Fuss Taxes is a PTIN-holding tax preparation firm. We are not a CPA firm, enrolled agents or attorneys.