Freelancers don’t get taxes withheld from a paycheck, which means you’re responsible for figuring out how much to pay to the IRS and your state. Federal self-employment taxes get most of the attention, but state taxes can take a big bite too. The challenge is that every state plays by different rules — some charge nothing, others use flat rates, and many use progressive tax brackets.
Here’s a clear way to estimate your state taxes so you know how much to set aside and avoid surprises at filing time.
Step 1: Know Your State’s Tax Rules
The first thing is understanding whether your state even taxes freelance income:
- No income tax states: Texas, Florida, Nevada, Washington, Tennessee, Wyoming, South Dakota, Alaska.
- Flat tax states: Colorado, Illinois, Indiana, Kentucky, Michigan, Pennsylvania, Utah — one rate for everyone.
- Progressive tax states: California, New York, New Jersey, Oregon, and most others. Higher income = higher bracket.
👉 Action: Check your state Department of Revenue site for the latest rates.
Step 2: Add Up Your Freelance Income
Freelancers report all self-employment income — whether you get a 1099-NEC, invoices from clients, or payments through platforms like Upwork or Fiverr.
Make a list of everything you expect to earn for the year.
Pro tip: Keep a running total month by month so you’re not scrambling in April.
Step 3: Subtract Business Deductions
Your taxable income is lower once you deduct business expenses. Common deductions include:
- Home office expenses
- Internet and phone
- Laptops, software, subscriptions
- Mileage or travel costs
- Health insurance premiums
These deductions reduce both federal and state taxable income in most states.
Step 4: Apply Your State’s Tax Rate or Brackets
Once you have your taxable income:
- Look up your state’s tax brackets.
- See which bracket your income falls into.
- Multiply taxable income by the rate (or portion of income in each bracket).
Example:
- A California freelancer with $60,000 in net income
- Roughly $50,000 after deductions
- The first portion is taxed at lower rates, but the income over $45,000 is taxed at 9.3%.
This layered approach explains why two freelancers earning the same income in different states can owe dramatically different amounts.
Step 5: Don’t Forget Quarterly Payments
Most freelancers must make quarterly estimated tax payments for both federal and state.
Typical due dates: April 15, June 15, September 15, January 15.
Miss a payment, and you risk penalties. Even if your state tax is small, pay on time to avoid extra fees.
Step 6: Multi-State and Local Taxes
If you live in one state but earn income in another, you may have to file nonresident returns or pay local city taxes (like in New York City or Philadelphia). Some states have reciprocity agreements that simplify this, but don’t assume — check before filing.
Step 7: Use Tools and Templates
You don’t have to do the math from scratch.
- Online calculators (Upwork, Everlance, TurboTax) give quick estimates.
- A simple spreadsheet can track income, deductions, and payments.
- Accounting apps like QuickBooks Self-Employed can automatically set aside tax money each month.
Step 8: Real-World Scenarios
- Freelancer in Texas: No state income tax. You only pay federal and self-employment taxes.
- Freelancer in California: $70,000 in net income → after deductions, around $62,000 taxable → state tax bill between $2,500 and $4,500 depending on brackets.
- Freelancer living in New Jersey, working in New York: May need to file in both states.
FAQs About State Taxes for Freelancers
1. Do freelancers pay state income tax?
Yes, unless you live in a state with no income tax.
2. How much should I set aside for state taxes?
A safe rule is 5–10% of income, depending on your state.
3. What if I live in one state but work for clients in another?
You may need to file in both states; look up reciprocity rules.
4. Do business expenses reduce state taxes?
In most states, yes. Deduct them just like you do federally.
5. Can I skip quarterly payments and pay at the end of the year?
You can, but you’ll likely face penalties. Quarterly is safer.
Robert is the creator of StateTaxesEstimator.com, a trusted resource dedicated to helping users accurately estimate their state taxes. With a strong focus on clarity and precision, Robert combines expert knowledge with practical tools to simplify complex tax calculations. His mission is to empower individuals and businesses to make informed financial decisions with confidence and ease.