Last Updated: June 2026
One of the most common mistakes new freelancers make is spending money that should have been set aside for taxes.
Unlike employees, freelancers and self-employed individuals do not typically have income tax automatically deducted from their earnings. That means when tax season arrives, many are shocked to discover they owe thousands of dollars to the Canada Revenue Agency (CRA).
So how much tax should freelancers save in Ontario?
The short answer is: more than most people think.
Depending on your income level, business expenses, and tax situation, setting aside 20% to 30% of your gross income is often a reasonable starting point.
Let’s break down how freelance taxes work in Ontario and look at real examples.
Quick Answer: How Much Tax Should Freelancers Save?
For many Ontario freelancers, a good starting point is:
| Gross Freelance Income | Suggested Tax Savings Rate |
|---|---|
| Under $30,000 | 15%–20% |
| $30,000–$60,000 | 20%–25% |
| $60,000–$100,000 | 25%–30% |
| Over $100,000 | 30%+ |
Your actual tax obligation depends on:
- Business expenses
- Federal income tax
- Ontario income tax
- Ontario Health Premium
- Self-employed CPP contributions
- Available tax credits and deductions
This is why using a freelance tax calculator is far more accurate than relying on generic percentages.
Example: Freelancer Earning $30,000 Per Year
Let’s assume:
- Gross freelance income: $30,000
- Business expenses: $3,000
- Taxable business income: $27,000
Estimated results:
| Item | Amount |
|---|---|
| Federal Tax | $1,477 |
| Ontario Tax | $708 |
| Ontario Health Premium | $300 |
| Self-Employed CPP | $2,797 |
| Total Estimated Tax + CPP Owing | $5,281 |
| Estimated After-Tax Income | $21,719 |
| Suggested Monthly Tax Savings | $440 |
Important Takeaway
Notice that the largest deduction is not income tax.
It’s CPP.
Many new freelancers are surprised to learn that self-employed individuals pay both the employee and employer portions of CPP.
This often creates a larger tax bill than expected.
Example: Freelancer Earning $80,000 Per Year
Let’s assume:
- Gross freelance income: $80,000
- Business expenses: $10,000
- Taxable business income: $70,000
Estimated results:
| Item | Amount |
|---|---|
| Federal Tax | $8,243 |
| Ontario Tax | $3,540 |
| Ontario Health Premium | $600 |
| Self-Employed CPP | $7,914 |
| Total Estimated Tax + CPP Owing | $20,296 |
| Estimated After-Tax Income | $49,704 |
| Suggested Monthly Tax Savings | $1,691 |
| Suggested Savings Rate | 25.4% |
For this income level, saving approximately one-quarter of gross income for taxes is a prudent approach.
Why Freelancers Owe More Than Employees
Employees generally see deductions removed automatically from every paycheque.
Freelancers do not.
As a freelancer, you may be responsible for:
Federal Income Tax
Canada uses a progressive tax system. Higher income generally results in higher tax rates on portions of your earnings.
Ontario Income Tax
Ontario applies provincial income tax in addition to federal tax.
Ontario Health Premium
Many Ontario taxpayers pay the Ontario Health Premium as part of their overall provincial tax obligation.
Self-Employed CPP
Employees pay half of CPP while their employer pays the other half.
Self-employed individuals pay both portions.
This is one of the biggest reasons freelancers often underestimate their tax obligations.
How Business Expenses Reduce Taxes
One advantage freelancers have is the ability to deduct eligible business expenses.
Examples may include:
- Home office expenses
- Internet costs
- Professional software subscriptions
- Advertising and marketing
- Business insurance
- Accounting fees
- Vehicle expenses (when eligible)
Because business expenses reduce taxable income, they can significantly reduce your overall tax burden.
Always keep detailed records and receipts.
What Percentage Should I Save for Taxes?
There is no single answer that works for everyone.
However, many freelancers use this simple rule:
Beginner Rule
Save 25% of every payment you receive.
For example:
| Invoice Payment | Suggested Tax Savings |
|---|---|
| $500 | $125 |
| $1,000 | $250 |
| $2,000 | $500 |
| $5,000 | $1,250 |
This approach helps avoid unpleasant surprises when tax season arrives.
Calculate Your Own Freelance Tax Estimate
Every freelancer’s situation is different.
A graphic designer earning $40,000 with few expenses will have different tax obligations than a consultant earning $120,000 with significant business deductions.
Use our Ontario Freelance Tax Calculator to estimate:
- Taxable business income
- Federal income tax
- Ontario income tax
- Ontario Health Premium
- Self-employed CPP
- Estimated total tax owing
- After-tax income
- Recommended monthly tax savings
Simply enter your income and expenses to get an estimate.
Frequently Asked Questions
How much tax should freelancers save in Ontario?
Many freelancers save between 20% and 30% of their gross income, although the correct amount depends on income level, expenses, and deductions.
Why is self-employed CPP so high?
Self-employed individuals pay both the employee and employer portions of CPP, whereas employees only pay half.
Do freelancers pay EI in Canada?
Most self-employed individuals do not pay regular Employment Insurance (EI) premiums unless they voluntarily register for the EI Special Benefits program.
Can business expenses reduce taxes?
Yes. Eligible business expenses reduce taxable income and can lower both income tax and CPP obligations.
Should I keep a separate tax savings account?
Many freelancers find it helpful to move a percentage of every payment into a separate savings account dedicated to taxes.
Calculation Methodology
Calculation Methodology
The examples in this article are based on estimates generated using the NetIncomeCanada Ontario Freelance Tax Calculator.
Calculations may include:
- Federal income tax
- Ontario income tax
- Ontario Health Premium
- Self-employed CPP contributions
- Self-employed CPP2 contributions (where applicable)
Calculations do not include:
- HST obligations
- RRSP deductions
- Tax instalment requirements
- All available tax credits
- Special EI benefits
- Professional tax planning strategies
Tax estimates are based on publicly available information from the Canada Revenue Agency (CRA) and the Government of Ontario and are intended for estimation purposes only.
Results are estimates only and should not be considered tax, accounting, or legal advice.
Sources:
Final Thoughts
Freelance income offers flexibility and independence, but it also comes with additional tax responsibilities.
The most effective way to avoid a large tax bill is to plan ahead and consistently set aside money throughout the year.
Whether you’re earning $30,000, $80,000, or $150,000 as a freelancer, understanding your estimated tax obligations can help you budget more effectively and keep more control over your finances.
Use our Ontario Freelance Tax Calculator to estimate your tax bill and determine how much you should be saving before tax season arrives.
Before tax season arrives, use our Ontario Take Home Pay Calculator to estimate how taxes affect your personal income.