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How Much Should a Solo Attorney Practice Set Aside for Taxes?

2026-08-21

How Much Should a Solo Attorney Practice Set Aside for Taxes?
Photo: KATRIN BOLOVTSOVA / Pexels

Learn how much solo attorneys should set aside for taxes in 2026, including federal, state, and self-employment rates, plus practical steps to avoid surprises.

As a solo attorney, you are both the firm and the finance department. Unlike W-2 employees, no one withholds taxes from your paychecks, so you must set aside money throughout the year. The short answer: plan to set aside 30% to 40% of your net income for federal and state taxes, plus self-employment tax. This guide breaks down the exact components, gives you realistic figures for 2026, and offers concrete steps to implement this week.

The Tax Components You Must Cover

Your tax obligations as a solo attorney fall into three main buckets:

  1. Federal income tax: Progressive rates from 10% to 37% for 2026 (same brackets as 2025, adjusted for inflation). Most solo attorneys fall into the 22% to 32% marginal brackets.
  2. Self-employment tax: 15.3% (12.4% for Social Security, 2.9% for Medicare) on net earnings up to the Social Security wage base ($176,100 in 2026). Above that, only the 2.9% Medicare portion applies.
  3. State income tax: Varies widely. States like Texas and Florida have no income tax, while California and New York can add 8% to 12% on top of federal.

Example calculation: If your net profit (after business expenses) is $120,000, your federal income tax might be around $22,000 (using 2026 brackets), self-employment tax is $18,360 (15.3% of $120,000), and state tax (say 6%) is $7,200. Total: $47,560, or about 39.6% of net income. That is why 30% to 40% is a safe range.

How to Calculate Your Personal Set-Aside Rate

Your exact percentage depends on your state and your income level. Here is a step-by-step method:

  1. Estimate your net profit: Review last year’s Schedule C or project this year’s revenue minus expenses. Use a conservative estimate.
  2. Calculate federal income tax: Use the 2026 tax brackets (single filer): 10% up to $11,600; 12% up to $47,150; 22% up to $100,525; 24% up to $191,950; 32% up to $243,725. Apply the brackets to your taxable income (net profit minus the standard deduction, $14,600 for single filers in 2026).
  3. Add self-employment tax: Multiply net profit by 15.3% (or 2.9% if above the wage base).
  4. Add state tax: Check your state’s rate. Use a flat estimate (e.g., 5% to 10%) if you are unsure.
  5. Divide by net profit: This gives you your set-aside percentage.

Example for a solo attorney in Texas (no state tax): Net profit $100,000. Taxable income after standard deduction: $85,400. Federal tax: $14,751 (using brackets). Self-employment tax: $15,300. Total: $30,051. Set-aside rate: 30.1%.

Example for California: Same net profit, but state tax adds about $7,000 (using 9.3% rate). Total: $37,051. Set-aside rate: 37.1%.

Practical Steps to Set Aside Money This Week

Do not wait until April. Here is what to do now:

  • Open a separate business savings account: Use a high-yield savings account (rates around 4% to 5% APY in 2026). Transfer your set-aside percentage after every client payment. For example, if you receive a $5,000 retainer, move $1,500 to $2,000 to your tax account immediately.
  • Make quarterly estimated tax payments: The IRS requires quarterly payments if you expect to owe more than $1,000. Deadlines are April 15, June 15, September 15, and January 15. Use Form 1040-ES. Underpaying can trigger penalties, so err on the side of overpaying slightly.
  • Use accounting software: Tools like QuickBooks Self-Employed or FreshBooks can track income and expenses, and they often have a tax savings feature that calculates your estimated tax automatically.
  • Review your expenses: Every deductible expense reduces your net profit and thus your tax bill. Common deductions for solo attorneys: home office, bar dues, CLE courses, legal research subscriptions, malpractice insurance, and client entertainment (subject to limits).

Common Mistakes to Avoid

  • Spending the tax money: It is tempting to treat your savings as a cash reserve. Keep it in a separate account and do not touch it.
  • Ignoring state taxes: Even if you live in a no-income-tax state, you may owe taxes in other states where you have clients. Consult a CPA if you practice across state lines.
  • Forgetting quarterly payments: Missing a deadline incurs a penalty of 0.5% of the unpaid amount per month, plus interest. Set calendar reminders.
  • Using gross revenue instead of net profit: You only pay tax on profit, not revenue. Track expenses diligently to lower your taxable amount.

FAQ

Q: What if I have a slow month and cannot set aside the full percentage?
A: Set aside what you can, but prioritize. If you fall short, you can catch up in a later month. The key is to avoid spending the money. If you consistently under-save, consider increasing your percentage to 40% to build a buffer.

Q: Can I deduct my health insurance premiums?
A: Yes, if you are self-employed and not eligible for an employer-sponsored plan. This deduction reduces your adjusted gross income, which lowers your tax bill. Keep records of premiums paid.

Q: Should I incorporate to save on taxes?
A: An S-corp can save on self-employment tax by paying yourself a reasonable salary and taking the rest as distributions, which are not subject to SE tax. However, this adds administrative costs (payroll processing, filings) and requires a CPA. For many solo attorneys, the savings outweigh the costs if net profit exceeds $80,000. Consult a tax professional.

Q: What if I owe more than I set aside?
A: You will owe interest and possibly penalties. The IRS offers installment agreements, but they accrue interest. To avoid this, reassess your set-aside rate and adjust upward. If you underpaid because of unexpected income, consider making an extra payment before January 15.

The Bottom Line

Set aside 30% to 40% of your net income for taxes, depending on your state and income level. Open a dedicated savings account, transfer funds after each payment, and make quarterly estimated payments. Track expenses to lower your taxable profit. If you are unsure about your specific situation, invest in a CPA who specializes in solo attorneys; the cost (typically $300 to $600 for tax preparation) is a deductible business expense and can save you thousands in penalties. Start this week: calculate your rate, open the account, and set your first transfer. Your future self will thank you.