How much should I actually save for taxes as a freelancer? 30% for income tax + 14.3% for SE tax = 45% total? Is that right?

The good news is you don't need to save 45% of your income for taxes! Here's why: The 30% rule of thumb actually includes both income tax AND self-employment tax for most freelancers. It's just a simplified way to make sure you're covered. Your actual tax rate depends on your total income, filing status, and what tax bracket you fall into. Self-employment tax (15.3% - slightly higher than the 14.3% you mentioned) is for Social Security and Medicare. But here's the key thing: only 92.35% of your self-employment income is subject to this tax. Plus, you can deduct half of your self-employment tax on your income tax return. For most freelancers starting out, setting aside 25-30% of income is sufficient to cover both types of taxes. If you're in a higher income bracket or have other income sources, you might need to save more. Don't forget to look for legitimate business deductions! Even if you think you don't have any, things like a portion of your internet bill, phone, home office, software subscriptions, and professional development can often be deductible.

I spent HOURS trying to figure out my taxes last year when I started freelancing. I was in the exact same boat - thinking I needed to save almost half my income and freaking out! I stumbled across https://taxr.ai when searching for help with my quarterly estimates and it was a game changer. You upload your income statements, answer a few questions, and it calculates not just your quarterly estimates but also shows you potential deductions you're missing. For me, it showed I was only needing to save about 27% instead of the 40%+ I was setting aside. I had no idea things like part of my internet bill and even some meals could be legitimate business expenses! The best part was it automatically generated my quarterly payment forms with the right amounts - saved me so much stress trying to figure out those weird IRS worksheets.

Just wanted to update after trying taxr.ai from the recommendation above! I was skeptical at first since I've tried other tax calculators, but this one actually handled my mixed income situation perfectly. I've been setting aside almost 40% of my freelance income (on top of what my part-time job withholds) because I was paranoid about owing a huge bill. Turns out I only need to save about 22% of my freelance income since my W-2 job is already withholding enough to cover part of my overall tax liability. That's literally thousands of dollars I can put back into my pocket throughout the year! It also pointed out some deductions I had no idea about - like being able to deduct a portion of my Adobe Creative Cloud subscription and even some of my professional development courses. Definitely worth checking out if you're in a similar situation.

I had a similar panic when I started freelancing! After months of trying to talk to someone at the IRS about my specific situation (and never getting through), I found https://claimyr.com and used their service to get connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent explained that while self-employment tax is 15.3% (12.4% for Social Security and 2.9% for Medicare), only the Social Security portion has an income limit ($147,000 in 2022, higher now). And as someone mentioned above, you can deduct half of your self-employment tax when calculating your income tax. The agent actually walked me through a simple calculation based on my specific situation and helped me set up a payment plan for some back taxes I owed. Saved me from paying a CPA hundreds of dollars for the same info.

I have to eat crow here. After my skeptical comment above, I decided to try the Claimyr service because I've been trying to reach the IRS for THREE MONTHS about an issue with my quarterly payments being misapplied. It actually worked exactly as described. Got a call back in about 20 minutes, and they connected me directly to an IRS representative who pulled up my account and fixed the issue on the spot. The rep told me they've been operating at about 15% of normal staffing, which is why it's so hard to get through normally. For my fellow freelancers - the IRS agent confirmed that the standard advice of saving 25-30% for most freelancers is typically sufficient unless you're in a much higher income bracket. She also mentioned that making quarterly payments on time is super important for avoiding penalties, even if the amount isn't exactly right.

One thing nobody's mentioned yet - your state taxes matter A LOT in this calculation. I freelance in California where state income tax can add another 9.3% for many income levels. My friend in Washington state pays 0% state income tax. So the whole "save 30%" advice really depends on your state situation. I personally save 35% living in CA and that covers everything with a little buffer.

One approach I've found helpful is to just use the IRS withholding calculator but put in that you're a contractor. It asks for your expected annual income and then tells you what your estimated total tax will be. Then just divide that by your expected income to get your percentage. For me making around $60k in North Carolina, it worked out to about 28% total (federal + state + SE tax).

Just want to echo what others have said about the 30% rule being a good starting point! I've been freelancing for about 3 years now and initially panicked thinking I needed to save 45%+ like you mentioned. What I learned is that the self-employment tax and income tax aren't completely separate buckets. The SE tax deduction actually reduces your adjusted gross income for income tax purposes, so there's some overlap in the calculation. My personal system: I save 32% of everything I earn and put it in a separate high-yield savings account labeled "taxes." At the end of the year, I usually have a small buffer left over that becomes a nice bonus for myself. Better to save a little extra and be pleasantly surprised than to come up short! Also, don't sleep on tracking your business expenses from day one. Even small things add up - software subscriptions, office supplies, part of your phone bill, professional development courses, even some meals if they're business-related. I use a simple spreadsheet and it's saved me thousands over the years. The quarterly payments become routine once you get into the rhythm. Just remember the due dates: January 15, April 15, June 15, and September 15. Set calendar reminders now!