How much of this invoice belongs to the IRS?
Federal + state + SE tax, accounting for expenses, half-SE deduction, and the QBI break — so the April bill doesn't blow your runway.
12 low · 22 middle · 32+ high.
0 TX/FL/WA · 6 avg · 10+ CA top.
15.3 std. SS portion caps at ~$168k.
Up to 20% if under income threshold.
Set aside from this invoice
$1,359
Effective rate 27.2% of gross
Take-home
$3,641
After $601 SE + $758 income tax
Self-employment tax
$601
SS + Medicare on net SE income × 92.35%
Income tax
$758
After half-SE & QBI (20%) deductions
Conservative
$1,495
Realistic
$1,359
Aggressive
$1,223
Conservative adds 10% buffer for AMT, NIIT, or bumping into a higher bracket mid-year. Always set aside conservatively.
Set-aside matches typical 1099 burden. Pay quarterly, audit annually.
Numbers are clean. Pay each quarterly estimate on time and keep tracking expenses.
- Net SE income = invoice × (1 − expense %)
- SE tax = net SE × 92.35% × SE rate
- Income taxable = net SE − ½ SE tax − QBI deduction
- Income tax = income taxable × (federal % + state %)
- Set aside = SE tax + income tax
- S-corp savings (proxy) = (net profit − $60k reasonable salary) × 50% × SE rate − $2k admin
Common questions
What percentage of my 1099 income should I save for taxes?▾
25–35% is the safe rule for most US freelancers: ~15.3% SE tax + federal income tax (10–24% effective) + state. High earners in CA/NY can hit 40%+.
Do I owe quarterly taxes?▾
Yes if you'll owe more than $1,000 in tax. Pay April 15, June 15, September 15, January 15. The IRS charges underpayment penalties if you wait until April.
What about the QBI deduction?▾
The 20% QBI deduction reduces taxable income for many service businesses below the threshold (~$383k joint / $191k single). It does not reduce self-employment tax.
Can I deduct business expenses before setting aside?▾
Yes — set aside based on net profit (revenue − legitimate business expenses), not gross. Home office, software, equipment, mileage all count if documented.
When should I switch to an S-corp?▾
Usually around $80–$100k net profit, when SE tax savings (~15.3% on the salary/distribution split) exceed the ~$1.5–2k/yr cost of running an S-corp (payroll + tax prep).