Two taxes, not one
1099 income carries self-employment tax (15.3% on 92.35% of net profit, covering both halves of Social Security and Medicare) plus federal income tax on what remains after the deduction for half the SE tax and the standard deduction.
Why the effective rate surprises people
A W-2 employee sees 7.65% FICA withheld; a 1099 contractor pays 15.3% because they cover the employer half too. Add income tax and a 90,000 net can face a combined rate near 30% — which is why quarterly estimated payments exist.
Quarterly payments
- Due April 15, June 15, September 15 and January 15
- Safe harbour: pay 100% of last year's tax (110% if AGI above 150,000)
- Underpayment penalty accrues even if you pay in full in April
- Set aside 25–30% of every invoice as it lands
Deductions that matter
Home office, mileage (70¢/mile for 2025), software, equipment, health insurance premiums and the employer-equivalent portion of SE tax are the big ones. Track them as you go; reconstructing a year in April costs money.
Frequently Asked Questions
How much should I set aside from each 1099 payment?
25–30% is a safe default until you know your effective rate.
Is the 15.3% SE tax on all my income?
Only up to the Social Security wage base for the 12.4% portion; the 2.9% Medicare part has no cap.
Can I deduct half my SE tax?
Yes — the deductible half reduces adjusted gross income.
Assumptions & disclaimer
Results are estimates for planning. Fee schedules, tax brackets and deduction limits change; confirm current figures with the marketplace, the IRS or a qualified accountant before making decisions. Nothing here is financial, tax or legal advice.
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