First Year Freelancing: How to Handle Estimated Taxes

In your first freelancing year, check 2025 first. If your 2025 total tax was zero, 2025 was a full year and you were a US citizen or resident all year, you don't have to pay 2026 estimated tax. If you owed tax in 2025, paying 100% of it during 2026 is often the easiest safe harbor.

Last reviewed September 23, 2026

Your first year of freelancing is the first time nobody takes tax out of your pay. That's a big change, and it's normal to feel unsure about it. The good news: the estimated tax rules for a first year are often gentler than people expect, because they look back at last year. This guide walks through the three situations most new freelancers are in, with 2026 numbers.

Do first-year freelancers have to pay quarterly estimated taxes?

It depends mostly on your 2025 tax, not your 2026 income. Under the 2026 Form 1040-ES, you generally must pay 2026 estimated tax only if you expect to owe at least $1,000 after withholding and your withholding will be less than the smaller of 90% of your 2026 tax or 100% of your 2025 tax (110% if your 2025 AGI was more than $150,000).

On top of that there's a full exception, and many first-year freelancers qualify for it.

How does the "no tax last year" exception work?

The 2026 Form 1040-ES says you don't have to pay estimated tax for 2026 if you were a US citizen or resident alien for all of 2025 and had no tax liability for the full 12-month 2025 tax year. You had no tax liability if your total tax was zero or you didn't have to file a return (IRC §6654(e)(2)).

Two things to watch:

• A refund is not zero tax. If tax was withheld from a part-time job and you got some back, your total tax may still have been more than zero. Look at the total tax line on your 2025 return, not the refund line.
• The exception excuses the payments, not the tax. You'll still owe all of your 2026 tax when you file by April 15, 2027.

Here's what that means in numbers. Take a new graduate with zero 2025 tax who expects $60,000 of freelance profit in 2026 (single, standard deduction). Our Quarterly Estimated Tax Calculator estimates:

No penalty, but a five-figure bill in April. Setting money aside from every invoice is what makes the exception work in your favour.

What if I had a W-2 job last year?

Then you probably owed tax in 2025, so the exception doesn't apply. But the prior-year safe harbor often makes your first year easy. You pay 100% of your 2025 total tax during 2026 (110% if 2025 AGI was more than $150,000), and that generally avoids the penalty, even if your 2026 tax is much higher.

Example: last year you earned a salary. Your 2025 return shows total tax of $6,000 and AGI of $55,000. This year you freelance full-time and expect $70,000 of profit.

The safe harbor keeps the quarterly payments low, but the April balance is large. If you can, set aside the full "set aside" percentage (about 20.5% here) and treat the safe harbor as the minimum you send the IRS during the year.

What if I moved to the US during 2025?

If you weren't a US citizen or resident for all of 2025, the zero-tax exception doesn't apply. The calculator also treats the prior-year safe harbor as unavailable in that case, which leaves the 90% current-year target. For the same $60,000 freelancer:

Residency rules can be tricky in a move year. If this is you, it's worth having a professional confirm your status before you rely on either rule.

What if I started freelancing partway through 2026?

Estimated tax installments are normally equal. But if your freelance income only began mid-year, the annualized income installment method (Form 2210, Schedule AI) may lower or remove the required payment for the periods before you started earning. The 2026 Form 1040-ES specifically points to this method when a large change after March 31 means you need to start paying. Our calculator assumes equal installments and doesn't model it.

As of September 23, 2026, the only 2026 due date left is January 15, 2027. You can skip that one if you file your 2026 return by February 1, 2027 and pay the full balance.

What good first-year habits make estimated taxes easier?

• Open a separate business account and move your set-aside percentage into a savings account each time you're paid.
• Keep your books monthly. Your estimate is only as good as your profit figure. Business expenses lower both income tax and SE tax.
• Pay online. IRS Direct Pay and your IRS Online Account are free. Choose "estimated tax" and the right tax year.
• Check your state. Many states with an income tax have their own estimated payment rules. Our calculator covers federal tax only.
• Put the dates in your calendar. Our tax deadlines calendar has an .ics download.

If you'd like help from the start, RAHA's Bookkeeping + Quarterly Estimates service handles your monthly bookkeeping and works out each quarterly payment, for a fixed price quoted upfront. For the full rulebook, see our pillar guide to quarterly estimated taxes, Do I Have to Pay Quarterly Taxes? and Estimated Tax Safe Harbor: 100% vs 110% Rule.

Frequently asked questions

I was a student with no income in 2025. Do I need to pay 2026 estimated tax?

Generally no, if you didn't have to file (or your total tax was zero), 2025 was a full year and you were a US citizen or resident all year. You'll still owe your 2026 tax when you file, so set money aside.

I got a refund last year. Does that mean my 2025 tax was zero?

Not necessarily. A refund means more was withheld than you owed. Check the total tax on your 2025 return. If it's more than zero, the exception doesn't apply, but the 100% prior-year safe harbor is based on that same number.

How much should a first-year freelancer set aside?

It depends on your profit and filing status. For a single filer with only freelance income, our calculator gives roughly 20% to 24% of profit for federal tax at $60,000 to $120,000 of profit. Add state tax where it applies.

Do I pay self-employment tax in my first year?

Yes, if your net earnings from self-employment are $400 or more. The zero-tax exception excuses estimated payments. It doesn't remove SE tax.

Can I skip estimated payments and just pay everything in April?

If the exception or the safe harbor covers you, you generally won't owe a penalty for doing that. Otherwise the IRS may charge an underpayment penalty, figured like interest at the underpayment rate (7% a year for October 1 to December 31, 2026).

Sources

• IRS, 2026 Form 1040-ES, Estimated Tax for Individuals: https://www.irs.gov/pub/irs-pdf/f1040es.pdf
• IRC §6654 (including (d) and (e)(2)): https://www.law.cornell.edu/uscode/text/26/6654
• IRC §1401 and §1402 (self-employment tax): https://www.law.cornell.edu/uscode/text/26/1401 and https://www.law.cornell.edu/uscode/text/26/1402
• IRS, Rev. Proc. 2025-32 (2026 brackets and standard deduction): https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
• IRS, About Form 2210: https://www.irs.gov/forms-pubs/about-form-2210
• IRS, Direct Pay with bank account: https://www.irs.gov/payments/direct-pay
• IRS, interest rates for the fourth quarter of 2026: https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-fourth-quarter-of-2026

This guide provides general information for educational purposes and is not tax, legal or accounting advice. Consult a qualified professional before acting.