How to Build a Freelance Tax Reserve

Freelancers often need to plan for tax payments because income can arrive throughout the year without payroll withholding. A separate reserve can make those future payments easier to manage.

Choose a planning base

You can calculate a reserve from a chosen amount of income or profit, depending on your bookkeeping approach and local tax rules.

Choose a reserve percentage

Use a percentage informed by your circumstances and, where appropriate, advice from a qualified tax professional. Do not treat a generic percentage as your actual tax rate.

Example

If your chosen planning base is $4,000 and your reserve percentage is 25%, the estimated reserve is $1,000.

Keep the reserve separate

Tracking the reserve separately from everyday spending can make it easier to see what cash is available for operating expenses.

Review regularly

Update your reserve approach when your income, expenses, deductions, business structure, or local tax requirements change.

Open the Tax Reserve Calculator

Related guides: Monthly Business Budget · Business Profit · Business Expenses

Tax rules vary by location and business structure. This guide is general planning information and is not tax advice.