Question 1

What are Upwork's service fees for freelancers?

Accepted Answer

Upwork uses a tiered fee structure based on lifetime billings with each client: 20% for the first $500 earned, 10% for earnings between $500.01 and $10,000, and 5% for earnings above $10,000. This is calculated per-client, not overall, so you restart at 20% with each new client.

Question 2

How much should I set aside for taxes as an Upwork freelancer?

Accepted Answer

Most Upwork freelancers should set aside 25-35% of their net earnings (after Upwork fees) for taxes. This covers self-employment tax (15.3%), federal income tax (10-37% depending on bracket), and state income tax if applicable. The exact amount depends on your total income, filing status, and deductions.

Question 3

Do I have to pay quarterly estimated taxes as a freelancer?

Accepted Answer

Yes, if you expect to owe $1,000 or more in federal taxes when you file your return, you must make quarterly estimated tax payments. Payment due dates are April 15, June 15, September 15, and January 15. Failure to pay quarterly can result in underpayment penalties.

Question 4

What expenses can Upwork freelancers deduct?

Accepted Answer

Upwork freelancers can deduct ordinary and necessary business expenses including: home office (simplified method: $5/sq ft up to 300 sq ft), computer equipment and software, internet and phone (business portion), professional development and courses, marketing and advertising, health insurance premiums (as self-employed), and retirement contributions to SEP-IRA or Solo 401(k).

Question 5

What is self-employment tax and why do freelancers pay it?

Accepted Answer

Self-employment tax is 15.3% (12.4% Social Security + 2.9% Medicare) on net self-employment earnings. W-2 employees split this with their employer (each paying 7.65%), but freelancers pay the entire amount. You can deduct half of the SE tax from your adjusted gross income.

Upwork Freelancer Tax Calculator

Questions About Freelancer Taxes?