There is no single flat percentage that is right for every 1099 earner — the real number climbs as your profit climbs, because two separate taxes stack on top of each other. Below is what those two taxes are, a worked table showing the actual federal percentage at three income levels, and the quarterly deadlines that keep a bill from turning into a penalty.
Two taxes, not one
Every number below starts from net profit: what is left from 1099 income after deductible business expenses — software, mileage, a home-office share, supplies, contractor fees — are subtracted. Tax is owed on the profit, not the gross deposit, which is also the strongest argument for tracking expenses year-round rather than reconstructing them in April.
A W-2 employee splits Social Security and Medicare with their employer, each paying half. On 1099 income there is no employer, so you pay both halves yourself — that combined 15.3% is self-employment tax: 12.4% for Social Security up to the annual wage base, plus 2.9% for Medicare with no cap, applied to 92.35% of your net profit (not the full amount). For 2026 the Social Security wage base is $184,500, up from $176,100 in 2025 (Social Security Administration, verified 26 September 2026) — profit above that still owes the 2.9% Medicare share, just not the 12.4% Social Security share.
On top of that sits ordinary federal income tax, at your regular bracket rate, on what remains after the standard deduction and after deducting half of the self-employment tax itself — that half-deduction is the one piece of relief built into the system for the tax you are paying twice.
What that actually adds up to
Not a rule of thumb. Here is the real 2026 arithmetic for a single filer taking the $16,100 standard deduction and the 2026 tax brackets (IRS, verified 26 September 2026), at three levels of net profit — federal tax only:
| Net profit | Self-employment tax | Federal income tax | Combined federal tax | Effective rate |
|---|---|---|---|---|
| $40,000 | $5,651.82 | $2,280.89 | $7,932.71 | 19.8% |
| $60,000 | $8,477.73 | $4,511.34 | $12,989.07 | 21.6% |
| $100,000 | $14,129.55 | $11,615.75 | $25,745.30 | 25.7% |
The rate climbs because self-employment tax is close to flat while income tax is progressive, and the two stack. That is why “set aside 25%” quietly overshoots at $40,000 and undershoots at $100,000. Filing jointly, a working spouse’s income, credits, and other deductions all move these numbers in your specific case — this table is a starting point for your own math, not a substitute for it. It is also federal only.
Add your state
State income tax is separate and layered on top wherever it applies, and it varies too widely to put one number here — from zero in several states to double digits in others, with its own brackets and its own rules for self-employment income. Check your state department of revenue’s current rate before you finalize your own set-aside percentage; do not borrow a number from a state you don’t live in.
The safe-harbor rule that keeps you out of a penalty
The IRS expects tax paid as income is earned, not once a year — which for 1099 income means quarterly estimated payments on Form 1040-ES. For 2026, the due dates are April 15, June 15, September 15, and January 15, 2027 for the fourth quarter.
You avoid an underpayment penalty by meeting the safe harbor: pay in, across the year, at least the smaller of 90% of this year’s actual tax or 100% of last year’s total tax (110% if last year’s adjusted gross income was over $150,000). Hit either threshold and the IRS does not charge a penalty even if you owe more at filing time — it just means the remaining balance is due, not a penalty on top of it.
Where the set-aside money goes
Treat your percentage the same way you would treat any other sinking fund — money with a known future use that does not belong in the account you spend from day to day. A separate, named tax savings account, funded the moment income lands, is the mechanic at the center of the buffer account method for irregular income: taxes come off the top before anything else is decided, in the same slice-the-income-first order that account uses for the buffer itself. If you like thinking in categories the way the sinking funds categories list does, quarterly taxes are simply the sinking fund with the shortest fuse and the least forgiving deadline.
Turn the percentage into a monthly habit
Once you know your own set-aside number, the Income Buffer tab is built for exactly this: pull taxes off the top first, then set the steady monthly wage you pay yourself from what’s left, and track the balance for twelve months.
Ten tabs in one spreadsheet. Opens in Excel, Google Sheets, Numbers or LibreOffice. One-time payment, instant download.
Educational information only, not personalized tax advice. Figures assume a single filer taking the 2026 standard deduction with no other income, credits or deductions — your own liability will differ. Consult a qualified tax professional for your specific situation. IRS figures verified 26 September 2026.
