How Much to Set Aside for 1099 Taxes

What the money is for

Nobody withholds tax from 1099 income, so you pay it yourself, in quarterly estimated payments. Three taxes make up the bill:

• Self-employment tax: Social Security and Medicare for the self-employed, 15.3% of 92.35% of your net profit. The Social Security part stops at $184,500 of net earnings in 2026; the Medicare part doesn't, and an extra 0.9% applies above $200,000 for a single filer.
• Federal income tax, on your profit less half of the self-employment tax, the standard deduction and, for many freelancers, the 20% qualified business income deduction.
• State income tax, in most states, on rules that vary by state.

All three are based on profit: what clients pay you minus business expenses. Expenses lower every one of them, so the share to set aside is a share of profit, not of everything you invoice.

How much to set aside for 1099 taxes, by income

Here is the 2026 tax as a share of profit for a single filer with no other income, taking the QBI deduction, in Texas (no state income tax) and California:

The share rises with income because income tax is progressive. A married couple, a freelancer with a spouse who has wages, or one with other income will land somewhere else, which is why a single percentage for everyone doesn't work. The 1099 tax calculator gives the figure for your profit, filing status and state, with a page for each state.

Turning it into a habit

The simplest system is to move the same percentage of every payment into a separate account the day it arrives. If your year looks like the $60,000 Texas example, that is about 20%: on a $5,000 client payment, set aside about $1,003, and pay the estimated tax from that account on each due date. Recheck the percentage once or twice a year as your income becomes clearer.

If you pay business expenses from the same income, base the percentage on profit and apply it to what is left after expenses, or apply a slightly lower percentage to the gross payment. Either way, the quarterly estimated tax due dates are when the money leaves the account.

Setting aside enough vs. paying enough

What you set aside should cover the whole year's tax. What you must pay in estimates to avoid the underpayment penalty can be less: the smaller of 90% of this year's tax and 100% of last year's (110% if last year's adjusted gross income was over $150,000). In a year when your income grows, paying the safe harbor and keeping the rest in savings until you file is a legitimate way to hold more cash, as long as the full balance is there in April.

Where you keep it matters a little too. A high-yield savings account earns interest until each payment is due, and a short Treasury bill pays interest that is exempt from state income tax.

Ways to owe less

• Record every business expense. Each dollar of expense saves self-employment, federal and state tax together.
• Use retirement accounts for the self-employed. Contributions to a SEP-IRA or solo 401(k) reduce income tax.
• Check whether an S corporation fits. Once profit is well above what a reasonable salary for your work would be, an S corporation election can cut self-employment tax, at the cost of payroll and a second tax return; the S corp tax savings calculator estimates it.

And if you are weighing freelance work against a job, the 1099 vs W-2 calculator shows the contract rate that matches a salary once the extra tax and the lost benefits are counted.

Married, with a job, or in your first year

Married filing jointly. The joint brackets and standard deduction are about twice the single ones, so if your spouse has no income, the share is lower at the same profit. In Texas, a joint filer with no other income would set aside about 17.3% at $60,000 and 19.5% at $100,000. If your spouse has wages, your freelance income is taxed on top of theirs, at higher rates, and the single-filer figures above are a better guide.

Freelancing on the side of a job. Form 1040-ES points out that if you also have wages, you may be able to avoid estimated payments by asking your employer to withhold more on a new Form W-4. Under section 6654(g), tax withheld from wages is treated as paid in equal parts on each due date unless you show the actual dates, which also helps if you start freelancing late in the year.

Your first year. The prior-year safe harbor uses last year's total tax. If last year you had a job with withholding and little other income, paying 100% of that tax in four installments (110% if your adjusted gross income was over $150,000) can avoid the penalty even if your freelance year turns out much larger. You still owe the difference in April, so keep setting aside the full percentage.

What the percentage leaves out

The percentages above cover federal self-employment tax, federal income tax and state income tax. A few things can come on top:

• Local income taxes. Some cities and counties tax income too; they aren't in the table.
• State business taxes. A few states without a personal income tax tax businesses instead, such as New Hampshire's Business Profits Tax above its filing threshold or Washington's business and occupation tax on gross receipts. The state pages of the 1099 tax calculator note these.
• Other income. Interest, a spouse's wages or a rental all raise the rate on your freelance profit. The table assumes none.

On the other side, some things lower the bill and the percentage: retirement plan contributions, deductible health insurance premiums for the self-employed, and every business expense. Rerun the numbers when any of them changes.