DanfioA 1099 says what you billed, not what you kept
Published 2026-10-20 · Last reviewed 2026-10-20
A 1099 does not say what you earned; it says what you billed. Between those two numbers sit business costs, a payroll-style tax you pay on both the employee and the employer side, and an income tax that no client withheld for you. This page follows one contract year all the way from the invoice total to the quarterly set-aside, then adds the one surtax that only appears once wages climb.
Revenue is not income
Start with $120,000 billed. Business expenses take $20,000 and retirement or health premiums taken above the line take another $5,000, leaving $95,000 of taxable profit. The self-employment tax is 15.3 percent of that profit - a flat view of the two FICA halves - or $14,535, and a state tax at 5 percent takes $4,750. What is left is $75,715: 63.1 percent of what was billed, with $44,285 gone to costs and tax before a single federal income tax dollar is counted.
| Line | Amount |
|---|---|
| Annual revenue billed | $120,000 |
| Business expenses | -$20,000 |
| Other deductions | -$5,000 |
| Taxable profit | $95,000 |
| Self-employment tax at 15.3 percent | -$14,535 |
| State tax at 5 percent | -$4,750 |
| Net kept | $75,715 |
Schedule SE applies 92.35 percent, not 100
The flat 15.3 percent view is the shape of the tax, not its statute. Schedule SE first multiplies profit by 92.35 percent, because the employer half of FICA is not itself subject to FICA; then it charges 12.4 percent for Social Security and 2.9 percentfor Medicare on that net earnings figure. On the same $95,000 of profit, net earnings are $87,732.50, Social Security is $10,878.83, Medicare is $2,544.24, and the self-employment tax is $13,423.07 - $1,111.93 less than the flat multiplication. Half of it, $6,711.54, is deductible, which pulls adjusted gross income to $88,288.46; the income tax on what is left is $7,417.17, the whole federal bill is $20,840.24, and four equal quarterly payments would be about $5,210.06 each.
| Line | Amount |
|---|---|
| Net profit | $95,000 |
| Net earnings at 92.35 percent | $87,732.50 |
| Social Security at 12.4 percent | $10,878.83 |
| Medicare at 2.9 percent | $2,544.24 |
| Self-employment tax | $13,423.07 |
| Deductible half | $6,711.54 |
| Federal income tax | $7,417.17 |
| Total federal tax | $20,840.24 |
| Quarterly payment | $5,210.06 |
The 0.9 percent surtax has a fixed income line
Most of the 15.3 percent bill stops at the Social Security wage base, but Medicare does not. On top of the ordinary 1.45 percent there is an Additional Medicare Tax of 0.9 percent, charged only on wages above a threshold fixed by filing status and never indexed for inflation: $200,000 for a single filer or head of household, $250,000 on a joint return, and $125,000 for a married-filing-separately return. At $250,000 of single wages, $50,000 sits over the line, the surtax is $450, ordinary Medicare is $3,625, and total Medicare is $4,075. An employer starts withholding the surtax once your own wages from that employer pass $200,000, whatever your filing status.
Where these numbers come from
- IRS Topic 554 and Schedule SE. The 92.35 percent net-earnings factor, the 12.4 percent and 2.9 percent shares and the half-tax deduction are all part of the same self-employment tax calculation the 1099 and self-employment calculators run.
- IRS Publication 15 (2026). The 0.9 percent rate and the $200,000 employer withholding line come from the same publication; the annual thresholds are statute amounts, which is why they are fixed rather than indexed.
- Both ways of looking at the same profit are shown here. $14,535 applies the single 15.3 percent rate used by the freelance net-income calculator; $13,423.07 applies the Schedule SE steps to the same profit. The gap, $1,111.93, is the 92.35 percent net-earnings factor, not a different tax.
What this guide does not cover
It prices one single filer with no W-2 job beside the contract, one flat state rate and the standard deduction. It does not model the qualified business income deduction's specified-service limits, a second job's shared Social Security wage base, retirement-plan contribution ceilings, the underpayment penalty's own computation, or state and local taxes beyond the placeholder rate. The surtax table here is applied to wages the way the standalone calculator applies it; self-employment income reaches the same 0.9 percent through Schedule SE, not through this table. A real contract year also has uneven cash flow, which the four equal quarterly payments deliberately smooth over.
Try your own contract year in the 1099 Tax Calculator, see what is actually kept in the Freelance Net Income Calculator, or price the surtax in the Additional Medicare Tax Calculator.
Estimates only - not financial, tax or legal advice, and it does not predict how the IRS will treat a particular return. Read the full disclaimer.