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Set aside 20% of profit after business expenses for federal tax at $40,000 of profit, 25% at $80,000 and 30% at $150,000, then add your state's rate. Single filer, 2026 rates.
We work out how much to set aside for taxes 1099 income creates, from your profit, deductions, state tax and any backup withholding already taken.
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To get the set aside rate, add self-employment tax (14.1% of profit), income tax at your bracket and state tax, then divide by profit.
Move that share of each payment into a separate savings account on the day the client pays, and recheck the rate each quarter.
A W-2 salary pushes 1099 profit into a higher bracket, so employees with side income who save a flat 25% or 30% owe more at filing.
The IRS takes a bigger share of 1099 profit as profit rises, because it taxes each added dollar in a higher bracket. A married couple filing jointly owes less on the same profit, because the IRS gives them wider brackets.
Find the row for your profit and filing status, then round the rate up to the next 5% as a buffer for a stronger quarter:
Illustrative: 2026 rates, standard deduction, 20% qualified business income deduction, no other income, no state tax. Married figures: one spouse earns the profit.
| Net profit | Single filer | Married, one earner |
|---|---|---|
| $40,000 | 18.6% | 15.1% |
| $80,000 | 20.8% | 18.6% |
| $150,000 | 25.1% | 20.7% |
We adjust the rate for any W-2 salary or itemized deductions before the first payment.
Federal tax on net profit, single filer, 2026
The set aside rate is self-employment tax, income tax and state tax added together, divided by net profit:
To see how much to set aside for self-employment tax, use 14.1% of profit while W-2 wages plus 92.35% of profit stay under 2026's $184,500 Social Security limit. You can run these steps on your own figures in our self-employed tax calculator, and we cover the tax in full under self employed quarterly taxes.
Apply the rate to the profit in each payment, after costs.
One invoice, worked through:
Illustrative: 25% federal rate, no other income, no state tax.
Move the set aside share into a savings account kept apart from spending money, on the day each client pays.
The IRS requires estimated payments when you expect to owe $1,000 or more after withholding and refundable credits. With a W-2 job, you can raise Form W-4 withholding instead.
Recheck the rate each quarter, and raise it after a big contract.
We set the exact figure from three months of deposits and expenses, federal and state together.
Confidential, and no documents needed to book the call.
Contractors who set aside a flat 25% or 30% owe more than they saved in two situations:
1099 profit on top of a $70,000 salary:
Salary. A single filer with $70,000 of W-2 pay is already in the 22% bracket after the standard deduction.
Side income. On $20,000 of 1099 profit, the same filer owes $2,826 of self-employment tax and $3,271 of income tax.
Rate. That $6,097 is 30.5% of the 1099 profit.
Illustrative: single filer, 2026 rates, salary withholding covers the salary's own tax, qualified business income deduction claimed, no state tax.
The IRS can charge an underpayment penalty when a taxpayer pays too little during the year, and our late estimated tax payment team handles the catch-up. At higher profit levels an S corporation election can cut self-employment tax; our S corp calculator shows the saving, and we run that comparison as part of the plan.
Taxpayers approach us after doing their taxes in TurboTax or on H&R Block or a do-it-yourself app, and they have a huge tax bill and they don't know why they have it. They don't know even how it came about. They sometimes don't have the money for it.
We set the rate per payment and the amount per quarter as part of our quarterly estimated taxes service.
We run year to date numbers through a trial return in professional software, so we base the rate on your actual deductions and state tax.
We send dollar amounts for each federal and state payment, plus a 20 minute planning call.
On the call we cover self employed tax planning moves that lower the tax before the first payment.
We rerun the numbers when income changes, with a 15 minute check in each quarter.
With a salary as well, we work out the extra W-4 withholding, and the client hands the form to the employer.
I'm a first time contractor that had mixed income last year. Figuring out your taxes when you've never done it like that before can be really overwhelming. The Dimov team made doing my taxes SUPER easy and a lot less stressful.
We quote a fixed fee before work starts, set by:
If the first consultation ends early, we credit the unused time toward later work. A contractor with one income source and a tidy expense summary pays the lowest tier. These are the factors, not a quote.
You can start mid-year, and we size the remaining payments from the income already earned. We confirm how much to set aside for taxes 1099 income has created so far, before the next due date.
Confidential, and answered by the team that prepares the return.
