Talley Tax

    How much should I set aside for quarterly taxes?

    David TalleyUpdated December 19, 2025

    Quick Answer

    Set aside 25-35% of your net business income for federal and self-employment taxes. The exact percentage depends on your total income, filing status, and deductions. Tennessee has no state income tax, which helps. Make quarterly estimated payments if you expect to owe $1,000 or more for the year to avoid underpayment penalties. Due dates are April 15, June 15, September 15, and January 15.

    The number one cash flow crisis I see with business owners? They crushed it all year, spent freely, and then April hits and they owe $40,000 they don't have.

    The rule of thumb: Set aside 25-35% of your NET profit (revenue minus expenses). Not gross revenue—net profit. The exact percentage depends on your total income level and filing status.
    Why it's a range: - If business is your only income and you're in a lower bracket: 25-27% - If you have other income pushing you into higher brackets: 30-35% - Self-employment tax alone is 15.3% on the first ~$160,000
    Tennessee advantage: No state income tax means you're only dealing with federal. That's a real benefit compared to business owners in most other states.
    When you must pay quarterly: If you expect to owe $1,000 or more for the year (after withholding and credits), you need to make estimated payments. Miss them and you'll pay underpayment penalties—not huge, but annoying and avoidable.
    The quarterly due dates: - Q1: April 15 - Q2: June 15 - Q3: September 15 - Q4: January 15 (of the following year)
    My recommended system: Every time revenue comes in, transfer 30% immediately to a separate savings account labeled "taxes." Don't touch it. When quarterly payments come due, the money's already there.

    I've seen too many business owners treat their bank balance as spendable cash. A third of that balance isn't yours—it belongs to the IRS. Treat it that way from day one.

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