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LearnFAQSelf-Employed & Small Business

How much should I set aside for taxes each month when I'm self-employed?

Answer

A common rule of thumb is to park 25–30% of your net self-employment income for taxes, though your exact rate depends on your bracket and state. Remember you owe two things: income tax plus self-employment tax of 15.3% on net earnings (covering Social Security up to the $176,100 wage base and Medicare), since you're paying both the employer and employee halves. High earners or those in high-tax states should lean toward 30–35%. The cleanest approach is to move that percentage into a separate tax savings account the moment each payment arrives, so the money is never available to spend. Then make quarterly estimated payments from that account. Recalculate as your income grows so you're not caught short in April. Treat the set-aside as non-negotiable — the tax bill is coming whether you saved for it or not.

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