Tax set-aside calculator for the self-employed
Figure out what percentage of every client deposit to route into a tax account. Answer two or three questions and get your number.
How the math works
Self-employed earners owe two federal taxes on every dollar of profit: regular income tax (10–37 percent depending on bracket) and self-employment tax (15.3 percent on the first $168,600 of net earnings, then 2.9 percent above that). Add your state's income tax on top.
Dividing last year's total federal tax by last year's gross business income gives you a real effective rate, already net of self-employment tax and any deductions you claimed. That's a more honest number than applying bracket percentages to gross.
We then add your state's effective rate, plus three percentage points of safety so you end the year with a small refund instead of a balance due.
What to do with the number
Open a separate savings account. Label it "Taxes." Every time a business deposit lands in your checking, move this percentage into the tax account the same day. Treat the money as if it already belongs to the IRS, because functionally it does.
Four times a year (April 15, June 15, September 15, and January 15), you pay the IRS through Direct Pay out of the tax account. The money was always there. You never had to scramble.
Full breakdown: Quarterly Taxes for Self-Employed: The Complete Guide.
When to adjust the rate
- Every January after you file. Use the actual federal rate from your return and reset.
- After a major income change. Crossing a bracket can bump your rate by 3 to 5 points.
- After a state move. Moving from California to Texas drops your state rate to zero.