The Quick Answer: 25 to 30 Percent
Most newsletter writers, whether you're earning through Substack, Patreon, Ghost, or direct sponsorship invoices, should set aside 25 to 30 percent of net income (income after deductions) for taxes. If you have a day job with withholding, or if your writing income pushes you into a higher federal bracket, bump that to 30 to 35 percent. There's no employer taking taxes out of your Substack payout, so this money has to come from you, in cash, before you spend it on anything else.
Why the Number Is Higher Than You'd Guess
When you're self-employed, you owe two separate taxes on your writing income:
- Self-employment tax: 15.3 percent of your net earnings, covering Social Security and Medicare. This is on top of income tax, and it exists because no employer is matching your payroll contributions.
- Federal income tax: taxed at your marginal rate, which depends on your total income including any spouse's income, day job wages, or other freelance work.
Add state income tax if you live somewhere that has one, and the 25-30 percent range makes sense for most writers earning a moderate side or full-time income. Your newsletter income gets reported on Schedule C, and the self-employment tax gets calculated on Schedule SE, both filed with your Form 1040.
Where the 1099s Actually Come From
Newsletter writers often get paid through several channels at once: Substack (which may issue a 1099-NEC or report through a payment processor), Patreon, Stripe for direct subscriptions, and sponsors who pay via invoice. Some of these issue 1099-NEC forms, some issue 1099-K forms if you cross processing thresholds, and some issue nothing at all. It doesn't matter whether a 1099 shows up. All of it is taxable income, and you're responsible for reporting it even if no form was ever generated.
Setting Aside Money Without a Guessing Game
The easiest system: every time a payment lands, whether it's a Substack payout, a sponsorship check, or affiliate commission, immediately move 25 to 30 percent into a separate savings account you don't touch. Do this the same day the money arrives, before it blends into your checking account and gets spent on hosting fees or a new microphone.
Before calculating that percentage, subtract your deductible business expenses: newsletter software subscriptions, a portion of your home office, editing tools, stock photo licenses, and even a percentage of your internet bill if you write from home. Lowering your net income lowers what you owe, so tracking these expenses throughout the year, not scrambling for receipts in April, actually reduces your tax bill.
Quarterly Payments Keep You From a Bad Surprise
The IRS expects self-employed writers to pay estimated taxes four times a year using Form 1040-ES, typically due in mid-April, mid-June, mid-September, and mid-January. If you don't pay enough throughout the year, you can owe a penalty on top of your tax bill in April, even if you eventually pay everything owed. Setting aside money as it comes in and paying quarterly based on that running total is the most reliable way to avoid a five-figure tax bill you weren't expecting.