How 1099 income is taxed
If you are paid as an independent contractor, nothing is withheld from your pay. You owe two federal taxes on your net profit: self-employment tax, which covers Social Security and Medicare, and income tax at your normal rates. Most contractors pay both through quarterly estimated payments.
How self-employment tax is calculated
- Start with net profit: 1099 income minus business expenses.
- Multiply by 92.35% to get net earnings from self-employment. No SE tax is due if this is under $400.
- Apply 15.3%: 12.4% for Social Security, on combined wages and self-employment earnings up to $184,500 for 2026, plus 2.9% for Medicare with no cap.
- Add 0.9% Additional Medicare Tax on earnings above $200,000 ($250,000 if married filing jointly).
- Deduct half of your SE tax (the employer-equivalent part) when working out income tax.
Worked example
A single rep with $80,000 of 1099 income after expenses and no other job:
- Net earnings: $80,000 × 92.35% = $73,880
- Self-employment tax: $73,880 × 15.3% = $11,303.64
- Income tax: $80,000 - $5,651.82 (half of SE tax) - $16,100 standard deduction = $58,248.18 taxable, which is $7,526.60 of tax under the 2026 brackets
- Total: about $18,830, or 23.5% of the $80,000, so roughly $4,708 a quarter
Quarterly estimated taxes
Contractors who expect to owe $1,000 or more for the year generally need to make estimated payments, usually due in April, June, September and January. Paying a quarter of your estimate each time keeps you clear of underpayment penalties in most cases. See the IRS guidance on estimated taxes.
Ways to lower the bill
- Track and deduct legitimate business expenses, such as mileage and phone costs for field sales.
- Check whether you qualify for the qualified business income (QBI) deduction, which this estimate leaves out.
- Contribute to a self-employed retirement plan such as a SEP IRA or solo 401(k).
Paying a team of 1099 reps?
Sequifi calculates commissions and pays 1099 contractors and W-2 employees in the same platform, and handles the year-end forms. See payroll processing or try the bonus and commission tax calculator for W-2 pay.
Book a demoFrequently asked questions
How much tax do I pay on 1099 income?
You pay self-employment tax of 15.3% on 92.35% of your net profit (12.4% Social Security up to the $184,500 wage base for 2026, plus 2.9% Medicare), and federal income tax at your normal rates after deducting half of your self-employment tax and your standard deduction. State income tax may also apply.
How much should I set aside for taxes on 1099 income?
It depends on your income and state, which is why a calculator helps. As one example, a single filer with $80,000 of 1099 profit and no other income would owe about $18,830 in federal tax for 2026, roughly 23.5%, or about $4,708 a quarter.
Do I have to pay quarterly taxes on 1099 income?
Generally yes, if you expect to owe $1,000 or more in federal tax for the year. Estimated payments are usually due in April, June, September and January.
What is the self-employment tax rate for 2026?
15.3%: 12.4% for Social Security and 2.9% for Medicare, applied to 92.35% of net self-employment earnings. The Social Security part stops once combined wages and self-employment earnings reach $184,500. An additional 0.9% Medicare tax applies above $200,000 ($250,000 married filing jointly).
Is 1099 income taxed more than W-2 income?
The income tax rates are the same. The difference is that a 1099 contractor pays both halves of Social Security and Medicare through self-employment tax, while a W-2 employee pays half and the employer pays the other half. Contractors can deduct half of their self-employment tax and their business expenses.
Sources: IRS 2026 inflation adjustments, IRS self-employment tax, IRS Publication 15 (2026). This calculator is an estimate and is not tax advice.