What this calculator does (step by step)

The point is clarity and consistency — not perfect tax law simulation. Freelancers usually need one thing: a reliable set‑aside habit that prevents “tax shock.” So we model taxes using a fast planning method: estimate monthly profit and apply your effective tax rates.

You enter your average monthly gross income and an expense percentage. Expenses include the recurring costs that keep your work running: software, contractors, platform fees, equipment, travel, subscriptions, co‑working, insurance, and so on. The calculator estimates monthly profit like this:

• Monthly profit = Monthly income × (1 − Expense rate)

Next, we compute an estimated tax amount for each category, applying your rates to profit:

• Federal tax = Profit × Federal effective rate
• State/local tax = Profit × State/local effective rate
• Self‑employment tax (optional) = Profit × SE rate

Why “effective” rates? Because they’re easier to use and often closer to reality for planning. If you have last year’s numbers, you can compute your effective rate by dividing total tax paid by taxable profit. If you’re new, choose conservative estimates and refine later.

Real tax returns include deductions and credits. This tool doesn’t try to perfectly predict those details. Instead, it offers an optional “impact” slider that reduces your estimated taxes by a percentage. Use it only if you have a strong reason to believe your taxes will be lowered in a predictable way (for example, a steady retirement contribution or a known credit).

• Adjusted taxes = Taxes × (1 − Deductions impact)

Freelance income is lumpy and uncertain. The buffer is there because mistakes are expensive: under‑withholding can lead to penalties, interest, and stress. A buffer also protects you if income rises mid‑year or if your expense estimate was too optimistic.

• Recommended set‑aside = Adjusted taxes × (1 + Buffer)

If you make estimated payments quarterly, it’s helpful to think in quarters. This tool uses a simple planning conversion:

• Quarterly set‑aside target = Monthly set‑aside × 3

If your income varies, the best practice is: set aside a percentage of profit from each payment the same day you get paid. That’s the habit that prevents tax surprises.

Three scenarios you can copy

These are simplified and use effective rates. Use them to sanity‑check your own numbers.

• Income: $8,000/mo
• Expenses: 25% → profit ≈ $6,000/mo
• Federal: 18% · State: 5% · SE: 15.3% · Buffer: 5%

Estimated taxes on profit ≈ $6,000 × (0.18 + 0.05 + 0.153) = $2,298. With a 5% buffer → about $2,413 per month set aside. Quarterly target ≈ $7,239.

• Income: $10,000/mo
• Expenses: 35% → profit ≈ $6,500/mo
• Federal: 16% · State: 0% · SE: 15.3% · Buffer: 7%

Taxes ≈ $6,500 × (0.16 + 0 + 0.153) = $2,029.50. With 7% buffer → ~$2,171 per month. Quarterly → ~$6,513.

• Income: $20,000/mo
• Expenses: 20% → profit ≈ $16,000/mo
• Federal: 22% · State: 8% · SE: 15.3% · Buffer: 10%

Taxes ≈ $16,000 × (0.22 + 0.08 + 0.153) = $7,312. With 10% buffer → ~$8,043 per month. Quarterly → ~$24,129.

If the result feels “too high,” don’t fight the math — adjust your spending plan. That’s how freelancers become financially calm.

Turn the estimate into a system (not a wish)

A calculator is a starting point. The real value comes from converting the result into a repeatable system. Here’s a workflow that keeps you safe even when income changes:

• Run the calculator, then note the effective set‑aside % of profit.
• If you’re new, keep a buffer (5%–10%) for the first year.
• After your first full tax year, replace your guesses with your real effective rate.

• Separate accounts reduce temptation and confusion.
• Name it “Taxes” and keep it boring.
• Transfer immediately after you get paid.

• Income hits your main account.
• Move expenses and tax set‑aside out first.
• What remains is truly spendable.

• Compare your tax vault balance to the quarterly target.
• If you’re short, increase buffer or rates.
• If you’re consistently high, reduce buffer slightly — but keep a cushion.

The “viral” secret: most freelance stress isn’t work — it’s uncertainty. A set‑aside system turns uncertainty into a routine.

Frequently Asked Questions

• Bracket vs effective rate — which should I use?

  Use effective rate for planning. Brackets apply only to slices of income and can mislead freelancers. Effective rate matches “what percentage did I actually pay overall?” which is what you need for a set‑aside habit.

• Gross income or profit?

  Most freelancers should plan taxes based on profit (income minus business expenses), because expenses usually reduce taxable income. This tool models that by estimating taxes on profit.

• My income is unpredictable — what should I do?

  Use this calculator to find a set‑aside percentage, then apply that percentage to every payment. That automatically scales up and down with your income.

• How much buffer is “right”?

  If you’re new or have lumpy income, 5%–10% is a strong default. If you’re stable and you have a prior-year effective rate, you may be comfortable with 0%–5%.

• Does this replace an accountant?

  No. This is a fast planning tool that helps you avoid surprises. For exact filing, compliance, and optimization, a qualified tax pro can help.

• Can I use it outside the U.S.?

  Yes. Replace the rates with your local effective rates and turn off self-employment tax if it doesn’t apply in your system. The budgeting logic still works.

Make it frictionless

If you want the “set aside” habit to stick, reduce friction: one transfer rule, one account, one review day per quarter. The simpler the system, the more you’ll actually follow it.

• Transfer the set‑aside the same day each client pays.
• Round up in good months. Future‑you will love you.