If you’ve ever looked at a 1099 tax bill and thought “that can’t be right, I’m in the 12% bracket,” this is the part nobody explained. It’s called self-employment tax, and for most techs it’s the biggest single piece of what they owe.
What it is
Self-employment tax is Social Security and Medicare for people who work for themselves. Everybody who works pays into these. The only difference is who pays and how.
- On a W-2 job, 7.65% comes out of your check (6.2% Social Security, 1.45% Medicare), and your employer quietly pays another 7.65% on top. You never see the employer’s half.
- On a 1099, there is no employer. You pay both halves yourself: 15.3%.
That’s the whole reason 1099 work feels like it’s taxed harder. It isn’t really. The company that pays you just isn’t covering the half an employer would.
How it’s figured
- Start with your profit: everything the companies paid you, minus your work costs.
- Multiply by 92.35%. (This knocks off the “employer half” so you aren’t taxed on money you’d never have been paid as an employee.)
- Multiply that by 15.3%.
Profit: $50,000
$50,000 × 92.35% = $46,175
$46,175 × 15.3% = $7,065 self-employment tax
A rule of thumb: self-employment tax works out to about 14.1% of your profit.
Why it surprises people
Income tax has a standard deduction ($16,100 for a single filer in 2026) and low brackets at the bottom, so the first chunk of income is taxed lightly or not at all. Self-employment tax has none of that. It starts on nearly the first dollar, once your profit for the year reaches $400.
So a tech with $40,000 of profit might owe only a couple thousand in federal income tax but over $5,600 in self-employment tax. People who budgeted for “my tax bracket” get blindsided by the other one.
The limits
- Social Security part (12.4%) stops at $184,500 of earnings in 2026. If you also had a W-2 job, your W-2 wages count toward that limit first.
- Medicare part (2.9%) has no limit. Above $200,000 of earnings for a single filer ($250,000 married filing jointly), an extra 0.9% Medicare tax kicks in.
- Under $400 profit for the year: no self-employment tax.
The breaks that come with it
Two things soften it:
- Half comes off your income. Half of your self-employment tax is subtracted from your income before income tax is figured, the same way an employer’s half would never count as your wages.
- It’s building your Social Security. Every dollar you pay counts toward your Social Security record, the same as a W-2 job. Techs who skip paying it don’t just risk penalties; they end up with smaller Social Security checks later.
How to make it smaller (legally)
There’s really one lever for most techs: lower your profit by tracking every real work cost. Self-employment tax is figured on profit, so every $100 of work cost you record saves about $14 in self-employment tax, plus whatever it saves in income tax.
That’s why the boring stuff matters: the meter you bought, the ladder, the boots, the work share of your phone, the miles between jobs, the equipment chargebacks the company took out of your pay. The full list for field techs.
Retirement accounts like a SEP IRA lower your income tax but not your self-employment tax. Only real work costs do that.
When it’s paid
Self-employment tax isn’t billed separately. It’s part of the same quarterly payments you send the IRS during the year, and it’s added up on your tax return on a form called Schedule SE. You don’t send it anywhere different.
The short version: plan on about 14% of your profit going to self-employment tax before you even think about income tax. Setting aside a third of every check covers that, plus income tax, plus most state taxes. How much to set aside.
This is general information about U.S. federal taxes, not advice for your situation. If something here doesn't match your paperwork, ask a tax preparer.