Freelancer Tax Estimator

Freelancers and self-employed individuals pay taxes differently from salaried employees. No employer withholds taxes automatically, so freelancers must estimate and pay quarterly to avoid IRS underpayment penalties.

The core formula: Annual Tax = Self-Employment Tax + Federal Income Tax, and the quarterly payment is a quarter of that.

Step 1: Calculate self-employment (SE) tax: SE Tax = Net Income × 0.9235 × 0.153

• The 0.9235 factor = 1 − 0.0765, which accounts for the deductible employer-equivalent half of SE tax
• 0.153 = 15.3% (12.4% Social Security + 2.9% Medicare)
• Above the Social Security wage base ($184,500 in 2026), only the 2.9% Medicare rate applies

Step 2: Deduct half of SE tax from income: Adjusted Gross Income = Net Income − (SE Tax ÷ 2)

Step 3: Take the Qualified Business Income deduction. Section 199A gives most self-employed people a deduction of 20% of business profit, capped at 20% of taxable income before the deduction itself. It is the largest single break available to a freelancer and the one that gets left out of nearly every rough estimate. It does not reduce self-employment tax, only income tax.

Step 4: Apply income tax brackets to what is left.

Step 5: Divide by 4 for the quarterly payment.

Quarterly due dates: 15 April, 15 June, 15 September, and 15 January of the following year. Those gaps are not equal, which surprises people: the second payment is due two months after the first, not three.

Worked example: Annual net freelance income $80,000, single filer, 2026 figures.

Two rows of that table are the ones people forget. Leave out the standard deduction and you overstate the bill by roughly $3,500. Leave out Section 199A and you overstate it by another $2,200. Miss both and you would put aside 28% of every invoice when 21% covers it.

Safe harbor rule. You avoid an underpayment penalty by paying the lesser of 90% of this year’s tax or 100% of last year’s, and that second figure becomes 110% if your prior-year adjusted gross income was above $150,000. Last year’s number is the one to use when your income is climbing, because it is fixed and knowable in January rather than a guess about December.

Most freelancers set aside 25 to 30% of every invoice. That covers federal tax with room for a state, and it is easier to keep to than a monthly calculation.