The honest answer depends on your other income. Here is the 2026 math and why the 25 to 30 percent rule is wrong for most people.
The rule of thumb says set aside 25 to 30 percent of every 1099 payment. For some people that is far too much, and for others it is not enough. The right number depends on three things: how much profit you will make, what other income your household has, and your state.
15.3% on 92.35% of your net profit (income minus business expenses). The 12.4% Social Security portion stops at $184,500 of combined wages and self-employment earnings for 2026; the 2.9% Medicare portion has no cap. Half of the self-employment tax is deductible from income.
Your net profit is added to any other income, reduced by the standard deduction ($16,100 single, $32,200 joint, $24,150 head of household for 2026) and the 20% qualified business income deduction, and taxed through the brackets. If 1099 work is your only income, the first dollars fall into the 10% and 12% brackets. If you also have a W-2 job, every 1099 dollar lands in your top bracket.
Nine states have none on earned income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. The rest range from about 2.5% flat to over 13% at the top in California. Some cities and counties add more.
Only income, no-tax state. Single, $72,000 of 1099 income, $9,000 of expenses, Texas. Net profit $63,000. Self-employment tax about $8,900. Federal income tax about $3,800 after the standard and QBI deductions. Total about $12,700, which is 17.7% of gross income. The 30% rule would have you over-saving by nearly $9,000.
Side hustle on top of a job. Married filing jointly, $90,000 of W-2 wages, plus $60,000 of 1099 income with $5,000 of expenses, New York. The 1099 income creates about $15,400 of extra tax, or 25.7% of the gross 1099 income, because it stacks on top of the wages and lands in the 22% federal bracket plus New York state tax.