How Much Should I Set Aside for Taxes if I'm Self-Employed?

If you're self-employed, it's important to plan ahead for taxes since they're not automatically withheld from your income. A common recommendation is to set aside 25% to 30% of your net income to cover:

• Self-employment tax (Social Security and Medicare)

• Federal income tax

• State income tax (if applicable)

What counts as net income?

Net income is your total income after subtracting your business expenses. For example, if you earn $70,000 and have $15,000 in business expenses, your net income is $55,000 and that’s what you should base your savings on.

Do I need to pay quarterly taxes?

Most self-employed individuals need to pay estimated quarterly taxes to avoid IRS penalties. You can calculate these using IRS Form 1040-ES or with the help of a tax professional.

💡 Pro Tip: Setting aside taxes in a separate savings account throughout the year can make it easier to stay on track and avoid surprises at tax time.