How we calculate your tax

The steps, in order

1. Profit. Income from 1099 and gig work, minus business costs, mileage and the simple home office deduction.
2. Self-employment tax. 92.35% of profit is taxed at 12.4% for Social Security, up to the wage base less any W-2 pay, and 2.9% for Medicare. An extra 0.9% Medicare applies above $200,000 ($250,000 married filing jointly). Nothing is due if the taxed amount is under $400.
3. Adjusted gross income. W-2 pay plus profit, minus half of the self-employment tax.
4. Taxable income. Minus the standard deduction, then minus the 20% qualified business income deduction. Above the income threshold we phase that deduction down to zero, which is how it works for service businesses and anyone without employees.
5. Income tax. The 2026 brackets for your filing status.
6. Set-aside. Total tax with your self-employment income, minus the tax on your W-2 pay alone, since your employer already withholds that part.
7. Quarterly payments. The smaller of 90% of this year's tax or 100% of last year's (110% if last year's AGI was over $150,000), minus withholding, split four ways.

What we leave out

State and local tax, tax credits, the self-employed health insurance deduction, retirement contributions, the alternative minimum tax and investment income tax. We say so on every page, because each one can move your number. For a return you're about to file, use tax software or a tax professional.