1099 & side work

Self-employment tax and the QBI deduction

Last verified: 2 min read Rule card + research brief
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How self-employment tax is builtSelf-employment tax is 15.3 percent, made of 12.4 percent Social Security and 2.9 percent Medicare, applied to 92.35 percent of net profit. That is about 14.13 percent of profit. The 12.4 percent part stops at the Social Security wage base, $184,500 in 2026, minus your W-2 Social Security wages. Half of SE tax is deductible.Self-employment tax12.4% Social Security2.9% Medicare= 15.3% on 92.35% of net profit (about 14.13% of profit)Social Security part stops at thewage base ($184,500 in 2026) minusyour W-2 Social Security wages.Medicare has no cap.Half of SE tax is deductible.Owed if net SE earnings ≥ $400.
How self-employment tax is built

Self-employment tax (settled)

  • 15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net profit. That's about 14.13% of profit. Owed if net SE earnings are $400 or more.
  • Coordination with your W-2: the 12.4% applies only up to the Social Security wage base ($184,500 in 2026) minus your W-2 Social Security wages. Medicare has no cap.
  • Half of SE tax is deductible.
  • If W-2 wages plus SE earnings exceed $200,000 (single), the 0.9% Additional Medicare Tax may apply.

QBI deduction (settled; one interpretation flagged)

  • 20% of qualified business income. QBI = profit − ½ SE tax − SE health insurance − retirement contributions. Limited to 20% of taxable income (before QBI, minus net capital gain).
  • OBBBA made it permanent. For 2026: threshold $201,750 single; the phase-in ends at $276,750.
  • Above the threshold, nursing and consulting are likely specified service businesses, so the deduction phases out. Ask a CPA.
  • 2026 minimum deduction: $400 if you have at least $1,000 of QBI from an active business you materially participate in.
    • Interpretation (flagged): our research tests the $1,000 after the SE and other adjustments. Re-check against the 2026 Form 8995 instructions.

Go deeper

  • Schedule SE line 8a subtracts your W-2 Social Security wages (boxes 3 + 7) from the base. So if W-2 wages plus SE earnings exceed the base, the excess SE earnings pay only the 2.9% Medicare part. (Schedule SE; SSA)
  • SSTB status: "health" explicitly includes nurses (Treas. Reg. §1.199A-5(b)(2)(ii)). This only matters above the 2026 threshold of $201,750 taxable income (single). Below it, SSTBs get the full 20%.

Watch: W-2 vs. 1099: what changes

Narrated explainer · 57 seconds · spoken narration with on-screen captions

Transcript
  1. A W-2 job and a 1099 job at the same hourly rate are taxed differently.
  2. W-2 mileage, scrubs, license renewals, and CEUs aren't deductible. Ask for reimbursement under an accountable plan instead.
  3. 1099 work opens Schedule C deductions, the 20% QBI deduction, and a SEP-IRA or Solo 401(k).
  4. But it adds self-employment tax: 15.3% on 92.35% of net profit, about 14.13% of profit.
  5. Example with made-up numbers: at the same $55 an hour, the 1099 offer took home about $925 less.
  6. Research, not tax advice. Confirm with a CPA or EA before filing.

Sources

Research, not tax advice. Confirm with a CPA or EA before filing.