How much of my freelance income should I put aside for freelance income tax?
To figure your estimated freelance income tax, you must estimate these items for the new year:
- Adjusted gross income (AGI)
- Taxable income
- Income taxes
- Self-employment taxes
Use your prior-year return as a guide. Adjust the amounts in each category, including freelance income tax, for changes you expect in the coming year. Your income minus deductions and credits will be your taxable income for the year.
Based on your filing status and age, check the tax tables against your estimated taxable income for the year. This will determine your estimated tax liability.
Divide your estimated tax liability into four estimated payments to be made each quarter. This assumes you’ll receive the income evenly throughout the year. If your income changes during the year, you should recalculate each quarterly payment based on the new amounts.
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Up to 50% or even 85% of your Social security benefits are taxable if your “provisional” or total income, as defined by tax law, is above a certain base amount. Your Social Security income may not be taxable at all if your total income is below the base amount.