How Much Taxes Do You Pay on 1099 Income?

Almost everyone self-employed has had to deal with the headache of income tax. For some, though, it’s less of a headache and more of a monster looming in the distance. That creeping fear as you ask yourself, “How much taxes do I pay on 1099 income?!”

Punishment for making a mistake with your taxes can result in you paying a 75% penalty on your taxes due. That’s not to mention the fines, too!

Instead of fearing making a tax blunder hanging over our heads, let’s brush up on our 1099 income form. It’ll be far quicker and less painless than feeling the wrath of the IRS!

How Much Taxes Do I Pay on 1099 Income

You’ll be dealing with a 1099 form if you have made more than $600 from non-salary work. If you’re below that threshold, you are safe! For everybody else, let’s look at exactly what we’ll be paying.

There’s a reason that people study for years to become accountants. If you’re newly self-employed or an independent contractor, you’re about to find out why.

The 1099 form isn’t a single catch-all form. There are multiple different types. On top of that, many, many factors go into calculating this tax.

You should keep one thing in mind as we move through this. All tax applies to your profit, not your revenue. That’s why anything you can count towards your business expenses helps during tax season.

State Tax

If you’ve been a W2 worker all your life, your employer will usually have taken care of all this for you. Now that you’re filling out your 1099, though, there are some extra things to consider.

First up is the state tax. Depending on which state you live in, you’ll be looking at up to a 7% tax. Take a look at this list of state tax rates if you’re unsure.

Congratulations if you’re one of the lucky ones that don’t have state tax!

Self-Employment Tax

Next up is the self-employment tax. That’s going to be another 15% of your earnings.

It might feel like this targets the self-employed, but it affects W2 workers too. In essence, it’s a social security contribution, but your employer usually takes care of it.

Tax Brackets

Now that we’ve calculated all of that, we can move to the federal tax rate on 1099 income. As soon as you’ve gone over $9,875, you’ll be paying 12% of your profit. Before that point, it’ll only be 10%.

The next bracket jump is quite a bit further away at $40,125. Once you’re in the bracket, the tax doubles to 24%.

Don’t worry too much about staying inside specific brackets if you are barely scraping them. 1099 income tax is a marginal tax rate, which deserves a whole explanation of its own.

Filing Your 1099

Doing amateur accounting is already enough of a time-sink, so you may as well save some effort by automating the process.

If you’ve never filed taxes on 1099 income before, you can click here for an easy-to-use online form that’ll make life easier. Why cause an ugly job to be even more difficult? Online forms like this have the bonus of keeping you on track.

More Business Knowledge

So, you’ve answered the question, “How much taxes do I pay on my 1099 income?” Now there’s only one thing left to do. File them!

If it’s filing tax returns or doing business, more information is better! The blog covers more than tips about filing your taxes. Keep your finger on the pulse of the categories we cover by reading more!