Self-employed? What to set aside
Why 1099 income costs more tax than the same salary.
On $60,000 of net profit, a single filer owes about $12,989 in federal tax — 21.6% of the profit — before any state tax. Roughly two thirds of that is self-employment tax, which is the part nobody warns you about when you go independent. Setting aside 25% to 30% is the practical answer.
The tax that has no W-2 equivalent
An employee pays 7.65% for Social Security and Medicare, and the employer quietly pays the matching 7.65%. When you are self-employed you are both, so you pay the whole 15.3% yourself.
It applies to 92.35% of net profit rather than all of it, and it splits in two: 12.4% for Social Security, capped at the $184,500 wage base for 2026, and 2.9% for Medicare with no cap at all.
| On $60,000 net profit | Amount |
|---|---|
| SE-taxable base (92.35% of profit) | $55,410 |
| Social Security at 12.4% | $6,871 |
| Medicare at 2.9% | $1,607 |
| Self-employment tax | $8,478 |
Half of it — $4,239 — is deductible against your income tax, which softens the blow but does not remove it. The self-employment tax itself is still owed in full.
Both taxes together
Self-employment tax is calculated first and independently of your standard deduction. Income tax then applies to what is left after the deductible half and the deduction:
| $60,000 net profit, single filer | Amount |
|---|---|
| Self-employment tax | $8,478 |
| Federal income tax | $4,511 |
| Total federal tax | $12,989 |
Add state income tax and the standard advice of setting aside 25% to 30% of net profit stops sounding conservative and starts looking about right.
Paying it four times a year
There is no employer withholding, so the IRS expects you to pay as you go. You generally owe quarterly estimated payments if you expect to owe $1,000 or more in federal tax after withholding and refundable credits.
For the 2026 tax year the federal deadlines are:
| Quarter | Due |
|---|---|
| Q1 | 15 April 2026 |
| Q2 | 15 June 2026 |
| Q3 | 15 September 2026 |
| Q4 | 15 January 2027 |
Dates shift to the next business day when they fall on a weekend or holiday, so confirm them on the IRS site each year rather than trusting a remembered date. On the $60,000 example, each payment would be roughly $3,247.
The safe harbour, which removes the guesswork
You avoid an underpayment penalty by paying the smaller of:
- 90% of this year’s tax — requires forecasting a year you have not finished, or
- 100% of last year’s tax — a fixed, knowable number. This rises to 110% if your prior-year adjusted gross income was above $150,000, or $75,000 filing married separately.
For most people with variable income the prior-year route is far easier: take last year’s total tax, divide by four, pay that. Your actual bill can come in higher and no penalty applies — you simply settle the difference at filing.
Two caveats worth knowing. Someone in their first year of self-employment has no prior-year return to lean on and is stuck with the 90% forecast, which is why the 25–30% set-aside habit matters most early. And penalties are assessed per period, so a single lump payment in April does not retroactively fix an underpaid Q1 — unless you are using the prior-year safe harbour, where hitting the annual target satisfies each quarter.
Things that change the number
- Business deductions reduce net profit, and therefore reduce both taxes. Home office, mileage, equipment, software, and health insurance premiums are the common ones.
- A retirement plan reduces income tax but not self-employment tax. A SEP-IRA or solo 401(k) shelters income from the income-tax layer only.
- Mixed W-2 and 1099 income changes the arithmetic, because W-2 withholding counts toward your safe harbour and is treated as paid evenly across the year. If a spouse has a salary, raising their withholding is often simpler than filing quarterly.
- Crossing the $184,500 wage base stops the 12.4% Social Security portion for the rest of the year. Medicare keeps going.
Run your own numbers
Open the Take-Home Pay Calculator
Mark an income stream as self-employed and it applies the 15.3% correctly, including the deductible half, alongside any W-2 income you also have. The Taxes calculator pulls it together with your other taxes into one effective-rate view, and both share data with the Command Center — with no sign-up.
CuraMoneta is an educational tool and does not provide financial, tax, or legal advice. Figures reflect federal rules for tax year 2026 and exclude state and local tax. Confirm deadlines and your own liability with the IRS or a qualified preparer.