How Much to Set Aside for 1099 Taxes

Assumptions: single filer, 2026 rules, standard deduction, no other income, and a business that qualifies for the full QBI deduction. Above roughly $200,000 of profit the QBI deduction can phase down, especially for specified service businesses such as consulting, medicine and law, and the 0.9% Additional Medicare Tax begins, so the percentage climbs faster.

For your own numbers, including filing status and other income, use the self-employment tax calculator.

• Self-employment tax starts at dollar one. 15.3% on 92.35% of net earnings, about 14.1% of profit, before any income tax.
• The Social Security part stops at $184,500 of 2026 earnings; the 2.9% Medicare part never stops.
• Additional Medicare Tax adds 0.9% above $200,000 of earnings for single filers ($250,000 married filing jointly).
• Half of self-employment tax is deductible, and the QBI deduction can cut taxable income by up to 20% of qualified business income, which is why the income tax piece is smaller than you might expect.

Your reserve should cover the full year's tax. Your quarterly payments only need to cover the safe harbor: the smaller of 90% of 2026 tax or 100% of 2025 total tax (110% if 2025 AGI was over $150,000), paid in four installments.

That gap matters most in a first freelance year. A designer who left a W-2 job had $9,000 of 2025 total tax on AGI under $150,000. Her 2026 safe harbor is $9,000, or $2,250 a quarter, even though her 2026 freelance tax will be about $22,400. She pays $2,250 each quarter, keeps the rest of her reserve in savings, and settles the balance in April 2027 with no penalty.

The final 2026 installment is due January 15, 2027; see the Q4 estimated tax payment guide. The full rules are in the estimated tax payments guide, and the estimated tax penalty calculator checks whether you are inside the harbor.

1. Open a separate tax savings account at the same bank as your business account so transfers are instant.
2. Move your set-aside percentage on every deposit, the day it lands. Use the table above plus your state rate.
3. Pay the safe harbor quarterly from that account through IRS Direct Pay or EFTPS.
4. Check in at mid-year with your books. If profit is running well above last year, raise the percentage, not the quarterly payment.
5. True up in April. Whatever is left after the return is filed becomes next year's cushion.

• Deductions you are entitled to. Home office, equipment, software, mileage, health insurance and more; see 1099 tax deductions.
• Retirement contributions. A Solo 401(k) reduces income tax, though not self-employment tax.
• The QBI deduction. Up to 20% of qualified business income for eligible owners; see the QBI deduction guide.
• An S corporation election once profit is high enough to justify payroll and a second return; run your numbers in the S corp tax calculator.

On a joint return, your 1099 profit stacks on top of your spouse's wages, so your marginal rate may be higher than the table suggests. The upside: a W-2 spouse can raise withholding on Form W-4 to cover your quarterly safe harbor, and withholding counts as paid evenly through the year. Many couples skip vouchers entirely this way.

State income tax on 1099 profit ranges from zero in states without an income tax to double digits at the top in states such as California. Most states also expect quarterly estimates with their own safe harbor rules. Add your state's effective rate to the federal percentage above, and if you work across state lines, check each state you earn in. California readers can start with the California estimated tax guide.