A good rule for how much to save for 1099 taxes is 25% to 30% of every payment you receive. That range covers federal self-employment tax and federal income tax together. If you live in a state with its own income tax, or you earn at the high end, plan to save more.
The reason the number feels high is that a 1099 payment is gross. Nothing has been withheld. You are on the hook for taxes a W-2 employer would have handled quietly in the background, plus the employer’s own share of payroll taxes.
What the 25%–30% Actually Covers
Two separate federal taxes come out of your net profit.
The first is self-employment tax: a flat 15.3% made up of 12.4% for Social Security and 2.9% for Medicare.1Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax In a regular job, your employer paid half of that. As a contractor, you pay both halves. The IRS softens the calculation slightly by letting you multiply net earnings by 92.35% before applying the 15.3% rate, which trims the effective rate by about a point. Self-employment tax starts once your net earnings hit $400 for the year.2Office of the Law Revision Counsel. 26 USC Ch 2 – Tax on Self-Employment Income
The second is regular federal income tax, applied to your net profit using the same brackets that apply to wages. For 2026, single filers pay:3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
- 10% on taxable income up to $12,400
- 12% from $12,401 to $50,400
- 22% from $50,401 to $105,700
- 24% from $105,701 to $201,775
- 32% from $201,776 to $256,225
- 35% from $256,226 to $640,600
- 37% above $640,600
These rates are marginal, so only the income inside each bracket is taxed at that bracket’s rate. The 2026 standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, and it comes off before the brackets apply.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Put the two taxes together and a middle-income solo contractor typically lands somewhere between 25% and 30% of net profit owed to the federal government. That is where the savings rule comes from.
When to Save More Than 30%
Push toward the higher end, or above it, in these situations:
You live in a state with income tax. Most states tax self-employment earnings. Top state rates run from roughly 2.5% to over 13%, and some cities and counties add another 1% to 4% on top. In a high-tax state, a total set-aside of 35% or more is realistic.
Your income clears $200,000. Self-employment income above $200,000 for single filers, or $250,000 for married couples filing jointly, gets hit with an additional 0.9% Medicare tax on top of the standard 2.9%.4Internal Revenue Service. Topic No 560 – Additional Medicare Tax You also move into the higher federal brackets.
You have no deductions to speak of. The 25%–30% range assumes you will claim ordinary business expenses. A contractor with almost no deductible costs pays tax on nearly the full 1099 amount.
When You Can Save Less
Two situations reduce the target.
If your net self-employment earnings for the year stay under $400, you owe no self-employment tax at all. You may still owe some income tax depending on your total income and deductions, but the 15.3% piece disappears.
If your net self-employment earnings exceed $184,500 in 2026, the 12.4% Social Security portion stops applying to the amount above that cap.5Social Security Administration. Contribution and Benefit Base The 2.9% Medicare portion continues without a ceiling, and the 0.9% surtax kicks in at the thresholds above, but the combined self-employment tax rate on income past the Social Security cap drops sharply.
Deductions Lower What You Actually Owe
The percentage you save is a target for setting money aside. What you actually owe comes down after you subtract legitimate business expenses, because both taxes are calculated on net profit, not gross receipts.
Common deductions on Schedule C include office supplies, software, professional development, advertising, insurance, and client travel. If you drive for work, the IRS standard mileage rate for 2026 is 72.5 cents per mile, which you can use in place of tracking actual vehicle costs.6Internal Revenue Service. 2026 Standard Mileage Rates
A home office used exclusively and regularly for business qualifies for a deduction. The simplified method pays $5 per square foot up to 300 square feet, for a maximum of $1,500.7Internal Revenue Service. Simplified Option for Home Office Deduction Exclusive use is strict: a spare bedroom used only for work qualifies; a kitchen table where you also eat does not.
You also get to deduct half of your self-employment tax when figuring adjusted gross income.8Office of the Law Revision Counsel. 26 USC 164 – Taxes This is automatic, whether or not you itemize. It reduces income tax only, not self-employment tax itself.
Independent contractors who are not organized as corporations may also qualify for the Qualified Business Income deduction, made permanent for 2026 and set at 23% of qualified business income.9Office of the Law Revision Counsel. 26 USC 199A – Qualified Business Income It phases out at higher incomes for service fields like law, medicine, consulting, and financial services. QBI cuts income tax but not self-employment tax.
Send the Money in Quarterly, Not All at Once
Saving 25% to 30% in a separate account is only half the job. The IRS expects you to pay as you earn, using Form 1040-ES four times a year. You must make estimated payments if you expect to owe $1,000 or more for the year after any withholding.10Internal Revenue Service. Form 1040-ES – 2026
Due dates for 2026 income:11Internal Revenue Service. When Are Quarterly Estimated Tax Payments Due
- Q1 (January 1 – March 31): due April 15, 2026
- Q2 (April 1 – May 31): due June 15, 2026
- Q3 (June 1 – August 31): due September 15, 2026
- Q4 (September 1 – December 31): due January 15, 2027
The periods are not evenly spaced. Many contractors just divide their estimated annual tax by four and send equal payments. You can pay through your IRS online account, IRS Direct Pay, EFTPS, or by mailing the voucher included with Form 1040-ES.12Internal Revenue Service. Estimated Taxes
The Safe Harbor Floor
Underpaying triggers a penalty that accrues interest on the shortfall. For the first quarter of 2026, the IRS charges 7% annual interest, compounded daily.13Internal Revenue Service. Quarterly Interest Rates You avoid the penalty entirely by meeting any one of three safe harbors:14Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
- You owe less than $1,000 for the year after withholding and credits.
- Your payments and withholding cover at least 90% of your current-year tax.
- Your payments equal at least 100% of your prior-year tax (110% if your prior-year adjusted gross income was over $150,000, or $75,000 if married filing separately).
The prior-year safe harbor is the easiest to work with when your income swings. Take last year’s total tax, divide by four, and pay that each quarter. If you end up earning much more, you will still owe the difference in April, but you will not owe a penalty. The 25%–30% you set aside is what covers that April balance.