How does tax liability scale as 1099 earnings increase?

Self-employment tax (15.3%) applies to all net profit up to the Social Security wage cap ($176,100 in 2026), above which only the 2.9% Medicare tax applies. However, progressive federal income tax brackets (from 10% up to 37%) cause your effective tax rate to climb as revenue grows.

At what income level should a 1099 contractor consider an S-Corporation?

Generally between $80,000 and $100,000 in net business income. At this level, paying a reasonable salary and taking remaining profits as distributions saves thousands in SECA taxes.