How much should you save for 1099 taxes?

The short answer

Most 1099 workers should set aside 25–35% of every deposit for taxes. The exact percentage depends on three things: your state, your total annual income, and your deductible expenses. When in doubt, 30% is a safe default for the typical gig worker or freelancer earning $30k–$80k/year.

Why 1099 taxes are higher than W2 taxes

When you work a W2 job, your employer pays half of your Social Security and Medicare taxes (7.65%). When you're 1099, you pay both halves yourself — that's the 15.3% self-employment tax. On top of that, you owe federal income tax (10–37% depending on your bracket) and, in most states, state income tax (0–13%).

That stacking is why "just save 20%" advice gets people in trouble. 20% covers self-employment tax with a little federal room — but nothing for state, and nothing if you cross into a higher federal bracket.

The three taxes you owe as a 1099 worker

1. Self-employment tax (15.3%) — Social Security (12.4%) and Medicare (2.9%) on your net earnings. You can deduct half of this on your federal return.
2. Federal income tax (10–37%) — Progressive brackets based on your taxable income after the standard deduction and business expenses.
3. State income tax (0–13%) — Varies widely. States like Texas, Florida, Tennessee, and Washington have no income tax. California, Hawaii, and New York are the highest.

A worked example

Say you're a DoorDash driver in Texas making $50,000/year in gross 1099 income, with $8,000 in deductible expenses (mileage, phone, supplies). Your net earnings are $42,000.

• Self-employment tax: 15.3% × $42,000 = $6,426
• Federal income tax (after SE deduction & standard deduction): roughly $2,800
• Texas state income tax: $0
• Total owed: ~$9,226

That's about 22% of net — or roughly 18% of every gross deposit. A Texas driver in this scenario can safely save 20–25% per deposit. A California driver in the same income bracket would need to save closer to 30–32% because of state tax.

Quick rules of thumb by income

• Under $30k/year: save 20–25% per deposit.
• $30k–$80k/year: save 25–30% per deposit.
• $80k–$150k/year: save 30–35% per deposit.
• Over $150k/year: save 35%+ per deposit; consider quarterly estimated payments.

Add ~3–5% if you live in a high-tax state (CA, NY, NJ, OR, HI). Subtract a few points if you live in a no-income-tax state (TX, FL, TN, WA, NV, SD, WY, AK, NH).

Quarterly estimated taxes

If you expect to owe more than $1,000 in federal taxes for the year, the IRS requires you to pay quarterly estimated taxes — roughly April 15, June 15, September 15, and January 15. Missing these deadlines triggers an underpayment penalty. Setting aside a percentage of every deposit is how you make sure you have the cash ready when each quarterly bill comes due.

Disclaimer

This guide is for general educational purposes and isn't tax advice. Tax situations vary. Consult a CPA or tax professional for advice specific to your circumstances.