How Much to Set Aside for 1099 Taxes

How Much to Set Aside for 1099 Taxes: A Table From $20,000 to $150,000 of Net Profit

A single filer with 1099 income should set aside about 17% of net profit for federal tax at $30,000, about 20% at $50,000 to $75,000, and 22% to 25% at $100,000 to $150,000, then add the state's share on top. The reason it climbs is that two taxes stack: self-employment tax is a flat 14.13% of net profit (15.3% of 92.35% of it), and federal income tax is added after a standard deduction and the qualified business income deduction. The old "put away 25% to 30%" rule is too much for most of this range and too little for a few.

Scope: a single filer, no other income, the standard deduction, no credits and no state tax. Change any of those and the percentages move. Married filers, anyone with a working spouse, and anyone with a health-insurance or retirement deduction will get different numbers. Information only, not tax advice.

The two taxes on your 1099 income

Contractors, gig workers and freelancers pay two federal taxes on the profit they make. This guide belongs to the self-employed, gig and seller math hub, and the freelance rate calculator works backward from a target income to an hourly price.

Self-employment tax (SE tax) replaces the Social Security and Medicare tax an employer would split with you. The IRS says you usually must pay it if your net earnings from self-employment are $400 or more, and that the amount subject to the tax is 92.35% of your net earnings. The rate is 12.4% for Social Security plus 2.9% for Medicare, which is 15.3%. The Social Security part applies only up to the year's wage base, which is $184,500 for 2026 (Publication 15). You can deduct half of the SE tax when figuring adjusted gross income. You owe all of this whether or not a payer sends you a 1099. (The payer reporting threshold under section 6041(a) rises to $2,000 for payments made after 2025, according to Rev. Proc. 2025-32, but that governs the payer's form, not your tax.)

Federal income tax applies to what is left after your adjustments and deductions, using the same brackets as employees. For 2026 the standard deduction for a single filer is $16,100, and the single brackets start at 10% up to $12,400, then 12% up to $50,400, 22% up to $105,700, 24% up to $201,775, and so on (Rev. Proc. 2025-32).

The extra piece for a business owner is the qualified business income (QBI) deduction. The IRS describes it as up to 20% of your qualified business income, limited to the lesser of that amount or 20% of taxable income minus net capital gain, and notes that qualified business income is net of the deductible part of self-employment tax. For 2026, the threshold at which other limits begin to apply is $201,750 for most filers (Rev. Proc. 2025-32), so every row in the table below sits under it.

One worked example: $50,000 of net profit

Take a delivery driver who keeps good records and ends the year with $50,000 of net profit after business expenses.

That is 19.5% of her net profit. Quarterly she should be moving about $2,433 into a tax account. In round terms: 14.13% for SE tax plus roughly 5.3% for income tax.

The table for every level

Each row is computed the same way as the $50,000 example, for a single filer with no other income, the standard deduction, no credits and no state tax. Married filers, anyone with a working spouse, and anyone with a health-insurance or retirement deduction will get different numbers. This is information for tax year 2026, not tax advice. "Marginal" is the federal tax on the next $1,000 of net profit, as a percent.

Three things stand out.

1. The SE tax share is constant at 14.13% of net profit until the wage base. At $150,000 of net profit the Social Security base is $138,525, still below $184,500, so the full 15.3% applies to every dollar.
2. The income tax share grows slowly because of the standard deduction and the QBI deduction. At $30,000 it is 3.1% of net profit; at $150,000 it is 10.9%.
3. The marginal rate steps up twice. At $20,000 to $30,000 of net profit your taxable income sits in the 10% bracket, and the next dollar costs 21.6% (SE tax plus 10% income tax, trimmed by the half-SE deduction and the QBI deduction). From about $34,000 of net profit, where taxable income crosses $12,400, it is in the 12% bracket and the next dollar costs 23.1%. Once net profit passes about $85,000, taxable income reaches the 22% bracket and the next dollar costs 30.5%. A big month or an extra job is taxed at that marginal rate, not at the average in the table.

Why a flat 25% or 30% is the wrong rule

A flat rate tries to include everything: SE tax, federal income tax, state tax and a safety margin. That is why you see 25% to 30% repeated. The table says the federal part alone is 15% to 25%, so the flat rule is generous at the low end and reasonable at the top, before state tax is added.

The better approach is a two-part rule:

• Federal part: use the table's share for your expected net profit.
• State part: add your state's income tax rate on net profit, or zero if your state has none.

A freelancer in a state with no income tax and $50,000 of net profit sets aside 19.5%. In a state with a 5% flat tax, add roughly 5% of net profit (the exact tax depends on the state's deductions), so about 24.5%.

If you have a spouse with wages, income from another job or investments, the table understates the bracket your profit falls in, because your first dollars of self-employment income sit on top of other income. Use your marginal rate instead of the table's average, and run the numbers with the IRS withholding estimator if your situation is mixed.

Net profit, not receipts: the mileage example

The percentages apply to net profit, so the first step is to know the deductions. A delivery driver is a good example because mileage is the biggest expense (the rideshare earnings calculator shows take-home after gas and vehicle costs). The IRS standard mileage rate for business use in 2026 is 72.5 cents a mile (effective January 1, 2026).

A second driver was paid $42,000 by delivery apps in 2026, drove 18,000 business miles and had $1,500 of other business expenses.

The log is worth $2,910.77 of federal tax. Set aside for taxes on net profit, not on what the apps deposited, but only if you really can support the miles with records. A mileage log with dates, destinations and miles is the standard way; a rough guess is not a record.

How much a mile is worth

For the same driver, the saving scales almost linearly with the miles logged. The table holds receipts at $42,000 and other expenses at $1,500 and varies only the business miles, at 72.5 cents each.

Each logged mile is worth about 16 cents of federal tax at this income, not the 72.5 cents of the deduction itself. The saving per mile falls slowly as the miles pile up because the driver drops into lower marginal territory. That is the useful number to compare with the cost of keeping a log: a mileage app or a notebook that captures an extra 1,000 miles a year is worth roughly $160 of tax.

Quarterly payments: what the IRS asks for

Form 1040-ES says that for 2026 you generally must pay estimated tax if you expect to owe at least $1,000 after subtracting withholding and refundable credits, and you expect your withholding and credits to be less than the smaller of 90% of the tax on your 2026 return or 100% of the tax on your 2025 return (the 2025 return has to cover all 12 months). If your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately), 110% replaces 100%.

The 2026 due dates are April 15, June 15, September 15 and January 15, 2027. The January payment is not required if you file by February 1, 2027 and pay the entire balance with your return.

The "smaller of" rule has a practical consequence when income jumps:

In the second case the 100%-of-prior-year option cuts the required quarterly payments to $2,250, even though the filer will owe about $12,000 more in April. The safe harbor avoids the penalty on underpayment; it does not reduce the bill. That is why you set aside the full percentage from the table anyway, even if the required payments are lower.

Three different businesses, three different percentages

The percentage of receipts you should set aside depends on how much of the money is cost.

The Etsy seller who sets aside 25% of receipts would be saving more than three times what the federal tax needs. A consultant who sets aside 18.6% of receipts is right at the line, and one who sets aside 15% falls short. This is why the first job each month is to work out net profit, and then apply the percentage to that.

A side hustle on top of a job

If you have a paycheque with Social Security and Medicare already withheld, the side income still owes the full SE tax, because the 12.4% Social Security part applies to the first $184,500 of combined wages and self-employment earnings, and the first dollars of side income sit below that line. The income tax lands on top of your wages, so it is taxed at your marginal rate.

Here is a single filer with $60,000 in wages and different amounts of side-business net profit. The extra tax is the added SE tax plus the added federal income tax, with the same standard deduction and QBI deduction.

The share is higher than the table for a full-time freelancer because the side income starts at the top of the wage earner's bracket. A good rule for a side hustle with $60,000 of wages is to set aside a quarter to a third of net profit. The wages' own withholding will not cover it, so a Form W-4 adjustment or a quarterly payment is needed. The 1040-ES notes that you can ask your employer to take more tax out of your earnings with a new W-4, which can avoid estimated payments on other income.

When your income is lumpy

The penalty for underpaying estimated tax is charged on each underpayment for the number of days it stays unpaid, so a payment due on June 15 that arrives in December is late even if the year's total is right. For people whose income is uneven, Form 1040-ES describes an alternative to equal installments: the annualized income installment method, explained in Publication 505, with Form 2210 and its Schedule AI filed with your return.

The method matters for two kinds of freelancer: someone who earns most of the year's income in the fourth quarter (a seasonal business, a holiday-driven shop) and someone who starts a business midway through the year. The form says that if you have a large change in income after March 31, 2026 that requires you to start making estimated tax payments, you should figure your payments with the annualized method.

Without the form, a simple habit is to estimate the whole year's net profit, read the share for that total from the table, and apply that single share to every deposit as it arrives, including the early small ones. Because the tax depends on the year's total, using one share all year keeps the account on track. Whether the IRS counts those payments as on time for each quarter is a separate question, and that is what the annualized method answers.

Where self-employed tax planning goes wrong

1. Setting aside a percentage of receipts instead of net profit. The Etsy seller above is the example.
2. Forgetting SE tax on small income. The IRS's $400 line applies to net earnings from self-employment, not to what a payer reports.
3. Counting only income tax. SE tax is usually the bigger piece at low incomes: at $30,000 of net profit, SE tax is $4,238.87 and income tax is $942.45.
4. Using last year's percentage after a jump. The marginal rate changes as profit crosses $85,000.
5. Mixing the tax account with the operating account. Money you have not yet paid to the IRS is a liability, not profit.
6. Skipping the state. Most states charge income tax on net profit, and many have their own estimated-payment rules.

Social Security's cap and the high-income end

The Social Security part of SE tax stops at the wage base. At $184,500 of combined wages and self-employment earnings for 2026, the 12.4% portion ends and only the 2.9% Medicare part continues (on 92.35% of net earnings). The IRS also lists an Additional Medicare Tax of 0.9% on self-employment income above $200,000 for single filers ($250,000 for joint, $125,000 for separate). Net profits in the table stay below both lines.

The QBI deduction also has limits above $201,750 of taxable income for a single filer in 2026 (the phase-in range runs to $276,750), which can reduce or remove it for certain service businesses. Those cases need a tax professional.

Rebuilding the table in a spreadsheet

CalculatorVillage does not have a 1099 or self-employment tax calculator for the US, so a worksheet is the working version of this table. With net profit in A1, these formulas reproduce the single-filer numbers for 2026 (they assume net profit stays below the Social Security wage base):

SE tax                     =0.153*0.9235*A1
Adjusted gross income      =A1-(0.153*0.9235*A1)/2
Income before QBI          =MAX(0, AGI-16100)
QBI deduction              =MIN(0.2*AGI, 0.2*(AGI-16100))
Taxable income             =AGI-16100-QBI deduction
Income tax                 apply the 2026 single brackets: 10% to $12,400; 12% to $50,400; 22% to $105,700; 24% to $201,775

Rebuilding it each quarter as the year unfolds takes a few minutes, because the whole calculation depends only on net profit. The US federal income tax brackets guide covers the bracket mechanics behind the income tax line.

Sources

• IRS, Topic no. 554, Self-employment tax (net earnings threshold of $400, 12.4% and 2.9%, 92.35%, deduction for the employer-equivalent portion, Additional Medicare Tax thresholds): https://www.irs.gov/taxtopics/tc554 (checked October 23, 2026)
• IRS, Publication 15 (2026), Employer's Tax Guide (Social Security wage base limit of $184,500 for 2026): https://www.irs.gov/publications/p15 (checked October 23, 2026)
• IRS, Rev. Proc. 2025-32 (2026 inflation adjustments: single brackets, $16,100 standard deduction, QBI thresholds of $201,750 and phase-in to $276,750, $2,000 reporting threshold under section 6041(a)): https://www.irs.gov/pub/irs-drop/rp-25-32.pdf (checked October 23, 2026)
• IRS, 2026 Form 1040-ES, Estimated Tax for Individuals (the $1,000 rule, 90% and 100% safe harbors, 110% above $150,000 AGI, due dates, penalty and the annualized income installment method): https://www.irs.gov/pub/irs-pdf/f1040es.pdf (checked October 23, 2026)
• IRS, Qualified business income deduction (up to 20%, lesser-of limit, QBI net of the deductible part of SE tax; page updated September 22, 2026): https://www.irs.gov/newsroom/qualified-business-income-deduction (checked October 23, 2026)
• IRS, 2026 business standard mileage rate of 72.5 cents per mile: https://www.irs.gov/newsroom/irs-sets-2026-business-standard-mileage-rate-at-725-cents-per-mile-up-25-cents (checked October 23, 2026)