How it works
Self-employment tax = 15.3% of (profit × 92.35%): 12.4% Social Security up to $184,500 of earnings, plus 2.9% Medicare, plus 0.9% Additional Medicare above $200,000 (single) or $250,000 (joint).
Federal income tax on the business = tax on (all income − half of self-employment tax − standard deduction) minus the tax you’d owe without the business, using the 2026 brackets.
Set aside = self-employment tax + federal income tax + state tax, as a share of profit. Quarterly payment = total ÷ 4.
A worked example
A single landscaper expects $60,000 of profit in 2026 and has no other income. Self-employment tax is $60,000 × 92.35% × 15.3% = $8,478. Half of that, $4,239, is deductible, along with the $16,100 standard deduction, leaving $39,661 of taxable income and about $4,511 of federal income tax.
Total: about $12,989, or 22% of profit, before any state tax. An even quarterly payment is about $3,247.
Common mistakes
- Setting aside a flat 10%. Self-employment tax alone is about 14% of profit before any income tax.
- Waiting until April. If you'll owe $1,000 or more, the IRS expects payments during the year, and underpaying can mean a penalty.
- Spending the tax money in a slow month. Move it to a separate savings account every time you're paid.
What this doesn’t tell you
An estimate, not tax advice. It uses the standard deduction and 2026 federal brackets and leaves out the 20% qualified business income deduction, credits, itemized deductions and other situations, so for most owners it leans high. If you also earn wages, your Social Security cap is shared, which this doesn't adjust for. A tax professional can give you an exact number.
Related calculators
Go deeper: 15 Numbers Every Small Business Owner Should Know, from The Groundwork Review.
Anticipated Questions
When are quarterly estimated taxes due?
For the 2026 tax year: April 15, June 15 and September 15, 2026, and January 15, 2027. When a date falls on a weekend or holiday, it moves to the next business day.
How can I avoid an underpayment penalty?
Generally, by paying at least 90% of this year's tax or 100% of last year's tax (110% if last year's adjusted gross income was over $150,000) through withholding and estimated payments. IRS Form 1040-ES explains the details.
Why doesn't this include the QBI deduction?
Many owners qualify for a deduction of up to 20% of qualified business income, but the rules have limits. Leaving it out keeps your set-aside on the safe side; your tax preparer will apply it.
What percentage should I set aside?
Enter your numbers above for your own figure. Your bracket, your state and any other income all change it, which is why a flat rule of thumb often misses.
Sources
- IRS: Self-employment tax (Social Security and Medicare taxes)
- IRS: Estimated taxes
- IRS: Tax inflation adjustments for tax year 2026 (Rev. Proc. 2025-32)
- Social Security Administration: 2026 contribution and benefit base ($184,500)
Last reviewed October 19, 2026. How our calculators work. General information for planning, not legal, tax or financial advice. Found an error? Email info@groundworkbusinessadvisory.com.
