Arizona freelancers owe the same federal self-employment tax as everyone — plus one of the simplest state taxes in the country, a flat 2.5%. Here is the full set-aside math, worked end to end.
Freelance income is taxed in three layers. First, self-employment tax — 15.3% covering Social Security and Medicare — applies to 92.35% of your net self-employment earnings. Second, federal income tax applies at your normal brackets, after deducting half of your self-employment tax and the standard deduction. Third, Arizona income tax applies at a flat 2.5%, the lowest flat rate in the nation, which makes the state layer the easy part of the estimate.
No client withholds any of this for you. The standard defense is boring and effective: move a fixed percentage of every payment into a separate savings account the day it arrives, and pay the IRS quarterly from that account. The only question is the percentage — and that is what the worked example below derives.
Run this once with last year's numbers (or a realistic projection) and you have a percentage to use all year.
Arizona's flat 2.5% rate has applied since tax year 2023, and Arizona conforms closely to federal income definitions, so most freelancers find the state estimate is the smallest and most predictable of the three layers. Phoenix-area freelancers sometimes also owe city privilege (TPT) tax on certain business activities — that is a business-license tax question, separate from income tax, and it depends on what you sell. This page covers income and self-employment tax only.
Quarterly estimated payments are due in April, June, September, and January (the fourth quarter's payment). Paying from the set-aside account keeps the quarters mechanical instead of stressful.
A single filer in Phoenix nets $60,000 from freelance work (after expenses). Illustrative figures — your brackets and deductions will move the federal line, which is exactly what the free estimator is for:
| Layer | Math | Estimate |
|---|---|---|
| Self-employment tax | $60,000 × 92.35% × 15.3% | ≈ $8,478 |
| Federal income tax | After half-SE-tax deduction and standard deduction | ≈ $4,650 |
| Arizona income tax | 2.5% on income after a standard-deduction allowance | ≈ $1,125 |
| Total estimated tax | ≈ $14,253 | |
| Effective set-aside rate | $14,253 ÷ $60,000 | ≈ 24% → use 25% |
| Monthly habit | 25% of a $5,000 month | $1,250 / month |
The percentage only works if the inputs stay true during the year:
The free Freelance Tax Estimator on this site takes your income, filing status, and state and returns an estimated total with a quarterly set-aside figure. To keep the inputs true all year, the $29 Freelancer Income and Expense Template tracks every payment and deduction as you go and estimates quarterly tax automatically, in Excel or Google Sheets.
Yes — Arizona offers a standard deduction that has generally tracked the federal amounts with state adjustments. The estimator's state layer uses a planning allowance; confirm the current-year figure at azdor.gov when you file.
Income tax is settled on the annual return, but most freelancers should make quarterly estimated payments to both the IRS and Arizona to avoid underpayment penalties. The set-aside account funds both.
No. This page is educational planning information showing how the estimate is built. Individual situations — retirement contributions, the qualified business income deduction, credits — change the answer, and a tax professional is worth it once income grows.