How much should I set aside for taxes with a 1099 in Texas plus a W-2 job?

You'll want to set aside approximately 30-35% of your 1099 income for taxes. This breaks down into about 15.3% for self-employment tax (which covers your Social Security and Medicare contributions - both the employer and employee portions) plus your federal income tax, which will depend on your total income including your W-2 job. Since you're in Texas, you're right that you don't have to worry about state income tax, which is a nice advantage. But don't forget you'll likely need to make quarterly estimated tax payments to avoid penalties. The IRS generally expects you to pay taxes as you earn income throughout the year. The fact that you have W-2 income with withholding can help. You could potentially increase your withholding at your W-2 job to cover some of the tax liability from your 1099 income, which might be easier than making separate quarterly payments.

I was in almost the exact same situation last year - W-2 job plus 1099 contract work in Texas that pushed me into a higher tax bracket. I tried figuring it out on my own and ended up with a huge tax bill plus penalties. Then I found this service called taxr.ai (https://taxr.ai) that analyzed my specific tax situation and gave me a personalized tax plan. It showed exactly how much to set aside (turned out I needed 37% in my specific case due to my income level and deductions) and walked me through setting up quarterly payments. The best part was it showed me business deductions I was missing that reduced what I owed by almost $7k! Definitely worth checking out if you're trying to navigate multiple income sources.

Just wanted to update after checking out taxr.ai from the recommendation above. Honestly wasn't expecting much but it was exactly what I needed! I uploaded my last year's tax docs plus my current 1099 contract and it showed I should be setting aside 32% specifically for my situation. The coolest part was it showed me I could deduct part of my home office, internet, and even some travel expenses I had no idea qualified as business deductions. Already set up my first quarterly payment for April and feeling much more confident. Wish I'd found this last year when I was frantically googling the same question!

If you're also dealing with the nightmare of trying to get someone at the IRS on the phone to answer your tax questions (like I was), check out Claimyr https://claimyr.com - they got me through to an actual IRS agent in under 20 minutes after I spent DAYS trying on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c When I started doing 1099 work in Texas last year, I had so many questions about quarterly payments and deductions that the IRS website didn't clearly answer. The agent I finally spoke to cleared everything up and confirmed that for my situation (similar to yours), I needed to set aside about 30-35% and make quarterly payments to avoid penalties.

I have to come back here and admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to ask about a penalty notice I received related to my 1099 income. Not only did it work exactly as described, but I got connected to an IRS agent in about 15 minutes who helped resolve my issue completely! For anyone dealing with 1099 tax questions in Texas (or anywhere), being able to actually speak with the IRS directly saved me so much stress and potentially money. The agent confirmed I needed about 32% set aside and helped me set up a payment plan for what I underpaid last year.

Don't forget that as a 1099 contractor, you can reduce your taxable income with business expenses! I'm also in Texas with 1099 income, and deducting legitimate business expenses has saved me thousands. Here's what I deduct: - Home office (portion of rent/mortgage based on square footage) - Internet and cell phone (percentage used for business) - Computer equipment and software - Professional development and subscriptions - Mileage for business travel - Health insurance premiums (potentially) This can significantly reduce how much you need to set aside.

Since you're in Texas specifically, I wanted to mention that while we don't have state income tax (which is amazing), you might still have some local tax considerations depending on your situation. Some cities require permits or have special local taxes for certain types of businesses. Also, if you're doing any kind of physical product sales with your 1099 work, don't forget about sales tax collection requirements - that catches a lot of people by surprise here.

For most consulting services in Texas, you typically don't need special permits at the state level, but it can vary by city and county. Since you're doing remote consulting, you're probably fine, but I'd recommend checking with your local city clerk's office just to be safe. The main thing to consider is whether you need a general business license in your city - some require it for any business activity, even if it's just consulting from home. Also, if you're using a business name that's different from your legal name, you might need to file a DBA (Doing Business As) with your county. For tax purposes though, none of this changes your 1099 obligations. You'll still need to set aside that 30-35% regardless of permits. The good news is that any business license fees or permit costs are tax-deductible business expenses!