How Much Should You Set Aside for Taxes as a Freelancer or Founder?

Short answer: most self-employed founders should set aside 25–35% of their net business income for taxes. If you want one number to start with, use 30% — then refine it once you know your real rate.

Why you have to set aside taxes yourself

When you're a W-2 employee, your employer withholds taxes from every paycheck. When you work for yourself, nobody does that for you — so the money lands in your account looking like it's all yours. It isn't. Spending it and scrambling in April is the single most common founder money mistake.

What the 25–35% actually covers

• Self-employment tax — 15.3%. This is Social Security + Medicare. As an employee you split it with your employer; self-employed, you pay both halves on your net earnings.
• Federal income tax. Depends on your bracket — anywhere from 10% to 37% on taxable income, though deductions lower it.
• State income tax. Ranges from 0% (e.g., Texas, Florida) to over 10% (e.g., California) depending on where you live.

Add those up and most solo founders land in the 25–35% range. Higher earners and high-tax states trend toward the top.

A simple way to pick your number

1. Estimate your net profit — revenue minus business expenses, not gross revenue.
2. Start at 30% of that net profit as your set-aside.
3. After your first tax filing, divide what you actually owed by your net profit — that's your real rate. Use it going forward.

Pay quarterly so you don't get penalized

The IRS doesn't want it all in April — it expects quarterly estimated payments (roughly mid-April, June, September, and January). Miss them and you can owe an underpayment penalty.

A useful guardrail is the safe harbor: you generally avoid penalties if you pay at least 90% of this year's tax, or 100% of last year's (110% if your prior-year income was over $150,000), in equal quarterly installments.

The hard part isn't the math — it's moving the money

Knowing the number is easy. Actually setting it aside before you spend it is what trips people up. Two habits fix it:

• Every time you get paid, immediately move your set-aside % into a separate "tax" account or vault.
• Automate the reminder so you never forget a quarterly deadline.

This is exactly what FounderFi does: it estimates your set-aside on your real numbers, splits income into Owner Pay / Tax / Profit with Profit-First allocation, and reminds you before each quarterly deadline.

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Educational guidance, not licensed tax advice. Your situation is unique — confirm specifics with a CPA.