By Ziya Y. · 23 Years Banking & Mortgage · Updated May 2026
📖 Real Scenario
Miguel makes $8,000/month freelancing for tech companies. Before taxes, he felt rich. Then April came. Self-employment tax: $1,130. Federal income tax: $1,240. State tax (CA): $560. Total: $2,930/month going to taxes. Miguel's real take-home: $5,070. He should have set aside 35% of every payment.
Q: How much tax do freelancers pay?
Self-employment tax (15.3% on first $168,600 of net income) + federal income tax (10-37% depending on bracket) + state income tax (0-13.3%). Combined effective rate for most freelancers earning $50K-$150K: 25-35% of net income.
Q: What percentage should I save for taxes?
Save 25-30% if you're in a no-income-tax state (TX, FL, NV). Save 30-35% in moderate tax states. Save 35-40% in high-tax states (CA, NY, NJ). Set it aside immediately when you receive payment — don't spend it.
Q: When do freelancers pay taxes?
Quarterly estimated taxes: April 15, June 15, September 15, January 15. Missing quarterly payments triggers underpayment penalties. Use IRS Form 1040-ES to calculate. General rule: pay at least 90% of current year's tax or 100% of last year's tax.
Q: What expenses can freelancers deduct?
Home office (dedicated space only), equipment, software, phone (business %), internet (business %), health insurance premiums, retirement contributions (SEP-IRA up to 25% of net), professional development, travel for business. Keep all receipts.
Not financial advice. Educational content based on 23 years of mortgage and lending experience. Consult a licensed professional for your situation.