Freelancing in California means three layers of tax on the same profit: federal self-employment tax, federal income tax, and one of the highest state income taxes in the country. The good news is that the state layer works differently from the federal one in a few ways that matter for planning.
What you pay on freelance profit
| Tax | Who collects it | 2026 rate |
|---|---|---|
| Self-employment tax | IRS | 15.3% on 92.35% of profit (12.4% part capped at $184,500) |
| Federal income tax | IRS | 10%–37% |
| California income tax | Franchise Tax Board (FTB) | 1%–12.3%, plus 1% on taxable income over $1 million |
Start with the federal part using the self-employment tax calculator and the quarterly estimated tax calculator; then add California on top.
California income tax on freelance profit
California taxes your business profit as ordinary income at progressive rates from 1% to 12.3%. For 2026, the 12.3% rate starts above $768,213 of taxable income for single filers. On top of that, the 1% Behavioral Health Services Tax (formerly the Mental Health Services Tax) applies to taxable income over $1 million. The FTB adjusts its brackets for inflation each year and publishes the full 2026 schedules in late December.
Three differences from federal rules catch freelancers out:
- No QBI deduction. California does not follow the federal 20% qualified business income deduction, so your state taxable income is often noticeably higher than your federal taxable income.
- No deduction for state tax paid. You cannot deduct California income tax on your California return.
- No separate state self-employment tax. California has no equivalent of the federal SE tax, and self-employed people are not automatically covered by State Disability Insurance (SDI). You can buy coverage through the state’s Elective Coverage program if you want it.
California estimated tax: not four equal payments
California’s estimated payment schedule is front-loaded, unlike the IRS’s equal quarters:
| Installment | Share of the year’s estimate | Due |
|---|---|---|
| 1 | 30% | April 15, 2026 |
| 2 | 40% | June 15, 2026 |
| 3 | 0% — no payment | September 15, 2026 |
| 4 | 30% | January 15, 2027 |
So by mid-June you are expected to have paid 70% of your California estimate. Pay federal estimates on the IRS schedule and California estimates on this one — they are separate payments to separate agencies (California payments go through the FTB with Form 540-ES or Web Pay). Once a single estimated or extension payment exceeds $20,000, or your total tax liability exceeds $80,000, the FTB requires you to pay electronically.
If you form an LLC
A single-member LLC is ignored for federal income tax, but not by California. Every LLC doing business in California owes:
- An $800 annual LLC tax, even in a year with no profit.
- An additional LLC fee once total California gross receipts reach $250,000, rising with receipts.
A sole proprietorship pays neither. That $800 is one reason many California freelancers stay sole proprietors until the liability protection is worth the cost — and one of the costs to weigh if you consider an S corporation. See S corp vs LLC.
How much to set aside in California
Because the state rate climbs quickly and there is no QBI deduction, California freelancers usually need to save more than the federal-only figure. In the tax set-aside calculator, enter your expected California rate in the state field — for many freelancers with moderate profits it lands in the 6%–9.3% range — and the calculator adds it to the federal percentage.
Other California items to know
- City business taxes. Cities such as Los Angeles and San Francisco have their own business tax registration and, above certain thresholds, business taxes. Check your city.
- Seller’s permit. If you sell taxable physical goods, you need a seller’s permit from the California Department of Tax and Fee Administration. Most services are not subject to sales tax.
- Retirement and health deductions such as a SEP-IRA or Solo 401(k) and the self-employed health insurance deduction generally reduce your California taxable income too.