Insights · August 2026 · Reviewed by a licensed CPA

A big client payment just landed — how much should I set aside for taxes?

This might be the question we hear most from new consulting and agency clients. The honest answer is "it depends on your bracket and your state" — but you need a number today, not a shrug, so here's the working rule we give people.

The rule of thumb

Set aside 25–35% of the payment into a separate savings account the day it arrives. Use the low end if your total profit this year will be modest or you're in a no-income-tax state; use the high end if you're having a strong year or you're in a high-tax state like California.

Why that range: as a self-employed person you're covering income tax plus 15.3% self-employment tax on your profit, and nothing is withheld for you. The single most common cash-flow disaster we clean up is a great year followed by an April bill nobody saved for.

Three upgrades to the rule

1. Move it where you can't see it. A separate high-yield savings account labeled "taxes" — transferred the day the payment clears, before it starts feeling like your money.

2. Pay quarterly, not annually. The IRS expects estimated payments through the year, and there's a safe-harbor rule that makes the amounts predictable. That's a full guide of its own — coming soon in the strategy library.

3. If the checks are getting big and regular, the percentage is the wrong tool. At consistent six-figure profit, the question stops being "what do I set aside" and becomes "is my entity structure costing me five figures a year" — see our guide to the S-corp election.