TooziI’ve Been Saving 25% of My Earnings for Taxes: Is That Too Much or Not Enough?
You’ve been setting aside 25% of every payment, and now you’ve read you may be taxed at a lower percentage. The honest answer: 25% is close for a lot of people, but the right number ranges from about 14% to 35% depending on your profit, your other income and your state.
Two different taxes, not one
- Self-employment tax covers Social Security and Medicare: 15.3% on 92.35% of your net profit, about 14.1% of profit. The Social Security part stops at $184,500 of earnings for 2026.
- Federal income tax, by bracket, after the standard deduction ($16,100 for a single filer in 2026) and half of your self-employment tax.
Add state income tax if your state has one. When you read “you may be taxed at a lower percentage,” that’s usually the income-tax part alone. Self-employment tax sits on top.
What people actually owe in 2026
Federal only, single filer, no other income, standard deduction, before the QBI deduction:
| Net profit | SE tax | Income tax | Set aside |
|---|---|---|---|
| $15,000 | $2,120 | $0 | 14% |
| $25,000 | $3,532 | $713 | 17% |
| $40,000 | $5,652 | $2,281 | 20% |
| $60,000 | $8,478 | $4,511 | 22% |
| $90,000 | $12,717 | $9,571 | 25% |
| $130,000 | $18,368 | $17,749 | 28% |
A $30,000 side hustle on top of a $70,000 job is different: those dollars land in a higher bracket, so they need about 35%. Get your own number from the set-aside calculator.
Why your number could be lower than 25%
- Profit is smaller than deposits. Tax applies to income minus business expenses, not every dollar that lands. Saving 25% of gross with high expenses overshoots.
- Modest income. The $16,100 standard deduction covers a big share of it.
- Deductions. The QBI deduction (up to 20% of qualified profit), retirement contributions and self-employed health insurance all lower income tax.
- No state income tax.
Why it could be higher
- Profit high enough to push you into the 24% bracket or above.
- A high-tax state: add 5 to 10 points.
- A spouse’s income raising your joint bracket.
- Untracked expenses, so you pay tax on money you actually spent.
- A side income on top of a W-2 job.
Find your number in four steps
- Use last year’s return. Federal income tax plus self-employment tax, divided by your Schedule C profit, is your effective rate.
- Add your state rate.
- Add a small buffer if your income is rising.
- Compare to 25%. 18%? You may be over-saving. 31%? You’re short.
Saving too much, or not enough?
Over-saving isn’t a penalty, just tight cash flow, and the extra comes back as a refund or covers next year. Under-saving is easier to fix now than in April: raise your rate for the rest of the year and make the Q4 estimated payment, due January 15, 2027. Missed quarters entirely? See catching up on unpaid estimated taxes.
This is why Toozi exists
A fixed percentage is a guess. Toozi turns it into a real estimate: it tracks what you earn and spend by text, applies the rules, tells you what to set aside from each payment, and reminds you before every quarterly deadline.
A tiny tax-account routine
- Open a savings account just for taxes.
- Move your percentage the day you’re paid.
- Check your rate once a quarter and adjust.
- Pay estimates from that account, not your spending money.
Swap “I think 25% is right” for a number you trust at toozitax.app.
Questions people ask
Is 25% enough to set aside for self-employment taxes?
For many people, roughly. For 2026, a single filer with no other income owes about 17% of profit in federal tax at $25,000, 22% at $60,000 and 28% at $130,000, before state tax and the QBI deduction. A side hustle on top of a $70,000 job needs about 35%.
Why is my self-employment tax so high?
Self-employed people pay both halves of Social Security and Medicare: 15.3% on 92.35% of net profit, about 14.1% of profit. The Social Security part stops at $184,500 of earnings for 2026. That is on top of income tax.
Should I save a percentage of revenue or profit?
Profit. Tax is figured on income minus business expenses, so saving 25% of every deposit overshoots when your expenses are high. Set aside from what is left after expenses, or use a lower rate on gross.
The Toozi team
Toozi isn’t your CPA and this isn’t formal tax advice. It’s the plain-English version. Rates, brackets and limits change every year, so check current IRS guidance or talk to a pro about your situation.