How much should I set aside for taxes as a 1099 worker?
Business owner
A common starting point is 25-35% of net 1099 income for federal income tax plus self-employment tax, with state added on top, but the right percentage depends on your full tax picture.
Why the number is higher than expected
1099 income is subject to federal income tax plus self-employment tax (currently around 15.3% on the first portion of net earnings). State tax stacks on top.
Build a system, not a guess
The simplest approach: route a fixed percentage of every deposit into a separate tax account, then make quarterly estimated payments from it. The percentage depends on bracket, deductions, and other income.
When to refine it
After the first year of clean records, your effective rate will be clearer. Adjust the savings percentage rather than scrambling at year-end.
What people often get wrong
- Saving the same flat percentage as a friend in a different bracket
- Forgetting that quarterly estimated payments exist
- Treating the tax account as a buffer for cash flow
What to think about next
- Open a dedicated tax account at a separate bank if possible.
- Pre-allocate every client deposit immediately.
- Set calendar reminders for quarterly estimated payments.
When to consider working with a CFP®
Working with a CFP® can help when these decisions feel intertwined, taxes, investments, cash flow, and life goals tend to move together, and a planning relationship can offer structure, prioritization, and accountability over time.
Frequently Asked Questions
What if I'm both W-2 and 1099?
The W-2 withholding can absorb some of the 1099 tax via additional withholding on the W-4, sometimes simpler than quarterly payments.
Talk to a CFP® who works with high earners.
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