How Much of 1099 Income Is Taxed: What Most People Get Wrong

When you first see that 1099 form hit your inbox or mailbox, it feels like a victory. You worked hard, you got paid, and—best of all—nobody took a chunk out of it before it hit your bank account. No FICA, no federal withholding, just the raw fruit of your labor. But then reality sets in.

You eventually realize you aren't just the worker; you're the payroll department. And the taxman hasn't forgotten about you.

The question of how much of 1099 income is taxed is actually a bit of a moving target. If you’re looking for a single, flat percentage, you’re going to be disappointed. Taxes for freelancers and contractors aren't a flat fee. They are a layered cake of federal, self-employment, and often state obligations. Most people end up losing anywhere from 20% to 35% of their total take-home pay to the government.

The 15.3% "Self-Employment" Reality Check

The biggest shock for most 1099 earners is the self-employment tax. When you’re a W-2 employee, you see Social Security and Medicare come out of your check. What you might not have known is that your boss was paying half of that for you.

Now, you are the boss.

The IRS wants 15.3% right off the top of your net earnings. This is broken down into 12.4% for Social Security and 2.9% for Medicare. Honestly, it feels like a double-dip because it basically is. You're paying both the employer and the employee portions.

There is one tiny bit of "good news" here, though. You don’t pay this tax on every single cent you made. The IRS only applies it to 92.35% of your net profit. Why that specific, weird number? It's a calculation designed to make things "even" with W-2 workers who don't pay taxes on the portion of their salary their employer contributes to FICA.

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Also, for 2026, there’s a cap. You only pay that 12.4% Social Security portion on the first $184,500 of your income. Once you cross that line, you only owe the Medicare portion.

Federal Income Tax Brackets for 2026

Once you’ve "paid yourself" for Social Security, you still have to pay the regular federal income tax. This is where your filing status—Single, Married Filing Jointly, or Head of Household—really changes the math.

For 2026, the tax brackets have shifted slightly due to inflation and new legislation like the "One, Big, Beautiful Bill" (OBBB). If you’re a single filer, you start at a 10% rate for your first $12,400 of taxable income. Once you pass that, you jump to 12% until you hit $50,400.

It keeps climbing from there:

• 22% for income over $50,400
• 24% for income over $105,700
• 32% for income over $201,775
• 35% for income over $256,226
• 37% for the high earners making over $640,600

Remember, these are marginal rates. You aren't taxed at 22% on everything just because you made $60,000. You pay 10% on the first chunk, 12% on the next, and so on. It’s a ladder.

The Standard Deduction and Business Expenses

Before you start crying over these percentages, let's talk about the shield. You don't get taxed on your "gross" income (the total amount on your 1099). You get taxed on your "taxable" income.

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First, you subtract your business expenses. If you spent $5,000 on a new laptop, office rent, and software to make $50,000, your starting point for taxes is $45,000. Keep every receipt. Seriously.

After that, you get the standard deduction. For the 2026 tax year, this has been bumped up significantly:

1. Single filers: $16,100
2. Married Filing Jointly: $32,200
3. Head of Household: $24,150

So, if you’re single and made $50,000 net after expenses, you subtract that $16,100 first. Now you're only being taxed on $33,900. That changes the vibe of the tax bill quite a bit.

The QBI Deduction: A Freelancer’s Best Friend

There is a specific perk called the Qualified Business Income (QBI) deduction. Most 1099 workers can deduct up to 20% of their business income right off their taxes.

While this was originally supposed to expire, recent law changes have made it permanent starting in 2026. If you're a sole proprietor or have an LLC, and your income is under $197,300 (for single filers), you basically get to ignore 20% of your profit when calculating your federal income tax.

It doesn't reduce your 15.3% self-employment tax, but it knocks a huge hole in your regular income tax.

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Don't Forget the States

If you live in Florida, Texas, or Nevada, congratulations—you can skip this part. But for everyone else, state income tax is the final boss. States like California or New York can grab another 5% to 13% of your money.

When people ask how much of 1099 income is taxed, they often forget that the IRS isn't the only one with its hand out. If you’re in a high-tax state, you need to be putting away closer to 35-40% of every check just to stay safe.

The Quarterly "Penalty" Trap

W-2 workers pay as they go. Every Friday, their boss sends money to the IRS. Since you don't have a boss, the IRS expects you to do this yourself four times a year.

If you wait until April to pay everything, you might get hit with an underpayment penalty. The deadlines are usually April 15, June 15, September 15, and January 15. It’s annoying. It’s easy to forget. But if you owe more than $1,000 in taxes for the year, the government wants that money in real-time.

Actionable Next Steps to Handle Your 1099 Taxes

Knowing the numbers is half the battle, but doing something about it stops the panic in April. Here is exactly what you should do right now:

• Open a separate "Tax" savings account. Every time a client pays you, move 30% of it there immediately. Pretend it doesn't exist.
• Track every single expense. Use an app or a simple spreadsheet. If you bought a pen for your business, it’s a deduction.
• Calculate your 2026 QBI eligibility. Most freelancers qualify, but if you’re in a "Specified Service Trade" (like law or health) and make over $197,300, the rules get weirdly complicated.
• Set up your EFTPS account. This is the Electronic Federal Tax Payment System. It’s the easiest way to send those quarterly payments so you don't get stuck with a massive bill and a penalty later.

Taxes for 1099 income are definitely higher than W-2 taxes on the surface because of that 15.3% self-employment hit. But with the right deductions and a solid 20% QBI write-off, you might find your actual "effective" tax rate is lower than you feared. Just don't let the money sit in your checking account thinking it's all yours. It isn't.