Quarterly Tax Estimator
Estimate your self-employment tax set-aside and split it into four quarterly installments.
Why freelancers set aside tax quarterly
No employer withholds tax from a freelancer's income, so the responsibility - and the cash-flow risk - falls on you. Splitting your estimated annual tax burden into four installments and setting that amount aside from every payment (rather than scrambling at filing time) is the single most reliable way to avoid an unpleasant surprise. Pair this with the main rate calculator's tax reserve field to bake this directly into every quote you send.
How US quarterly estimated taxes work
Employees have tax withheld from every paycheque. Nobody withholds anything from a client payment, so the US system asks the self-employed to pay as they go, in four instalments across the year. Miss them and you can owe an underpayment penalty even if you settle the full bill at filing.
Generally you are expected to make estimated payments if you expect to owe $1,000 or more for the year after any withholding and credits.
Self-employment tax, specifically
This is the part that surprises people leaving employment. Self-employment tax is 15.3% - 12.4% for Social Security plus 2.9% for Medicare - and it is separate from income tax. As an employee you only ever saw half of it; your employer paid the rest. Now you pay both halves.
- It applies to 92.35% of your net self-employment earnings, not your gross revenue.
- The Social Security portion applies only up to an annual wage base that changes each year - check the current IRS figure.
- The Medicare portion has no cap, and an additional Medicare tax applies above certain income thresholds.
- You can deduct half of your self-employment tax when calculating income tax, which softens the effective rate.
Between self-employment tax and federal and state income tax, many US freelancers land somewhere around 25-30% effective - but the spread is wide, and your situation may sit well outside it.
Safe harbour: how to avoid a penalty
You do not have to predict your income perfectly. The safe harbour rules mean you avoid an underpayment penalty if you pay at least one of the following across your four instalments:
- 90% of the tax you owe for the current year, or
- 100% of the total tax shown on your prior year return - rising to 110% if your prior-year adjusted gross income was above $150,000.
The prior-year figure is the easier target because it is a known number. In a year when income is climbing sharply, paying to the prior-year safe harbour and reserving the difference is a common approach - you stay penalty-free and settle the balance at filing.
When payments are due
US estimated payments are due four times a year, in mid-April, mid-June, mid-September, and mid-January of the following year. The exact dates shift when they fall on a weekend or holiday, and the quarters are not equal lengths - the second "quarter" covers only two months.
Set the money aside as it arrives rather than at the deadline. A separate account that receives your reserve percentage from every client payment is the single most effective habit here, because the money is never available to spend in the first place.
Reserving from every payment
The practical version of all this is a percentage, applied on receipt:
every client payment → move (reserve %) to a separate account
→ spend only what remains
reserve % ≈ self-employment tax
+ federal income tax bracket
+ state income tax (if applicable)
− deductions you are confident of
Estimate the percentage with the calculator above, then check it against reality once a quarter. For where the tax reserve fits into overall project profitability, see the full rate calculator, or read the walkthrough in how much to set aside for freelance taxes.
Frequently asked questions
How much should I set aside for freelance taxes?
Many US freelancers reserve 25-30% of net income, covering self-employment tax plus federal and state income tax. The right figure depends on your bracket, state, deductions, and entity structure, so treat any percentage as a starting estimate and confirm it with an accountant.
What happens if I miss a quarterly payment?
The IRS can charge an underpayment penalty, calculated as interest on the amount that was due and unpaid from the due date. It applies even if you pay the full balance at filing. Meeting a safe harbour threshold across your instalments is what prevents it.
What is the self-employment tax rate?
15.3% - 12.4% for Social Security and 2.9% for Medicare - applied to 92.35% of net self-employment earnings. The Social Security portion stops at an annual wage base that changes yearly; Medicare has no cap. Half of the self-employment tax is deductible against income tax.
Do I have to pay estimated taxes in my first year freelancing?
Generally yes, if you expect to owe $1,000 or more. The prior-year safe harbour is less helpful in a first year with little or no prior self-employment income, so first-year freelancers usually work from the 90%-of-current-year test and reserve conservatively.
Not tax advice. Loomrate performs arithmetic on figures you supply. US tax rules change, and your liability depends on your state, entity structure, deductions, and circumstances. Verify current rates and deadlines with the IRS and confirm your position with a qualified accountant.