IT consultants: turn contract rates into long-term savings
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Where it consultants typically get paid
W-2 or 1099?
IT consultants may be W-2 through a staffing firm, 1099 contractors, or corp-to-corp through their own LLC or S corporation. W-2 contractors have withholding; 1099 consultants pay their own estimated and self-employment taxes, while S-corp owners pay payroll taxes on their own salary.
Equipment and certifications
Laptops, test hardware, cloud and software subscriptions, and certification exams for your current work are deductible; 100% bonus depreciation is permanent for qualified property acquired after Jan. 19, 2025.
QBI and consulting
Consulting is a specified service field. If your work counts as consulting, the 20% QBI deduction phases out between $201,750 and $276,750 of 2026 taxable income ($403,500-$553,500 joint). Some IT work, like building software, may not be consulting; ask a tax professional.
Self-employment tax
If your net earnings from self-employment (92.35% of net profit) are $400 or more, you owe 15.3% self-employment tax on them; the 12.4% Social Security part stops at the $184,500 wage base, counting any W-2 wages first.
Retirement
Self-employed people can use a Solo 401(k) ($24,500 employee deferral in 2026; $72,000 total additions cap, not counting catch-ups) or a SEP IRA (employer-style contributions on up to $360,000 of compensation), plus an IRA up to $7,500 ($8,600 at 50+).
IT consultant questions, answered
When are 2026 estimated taxes due?+
Quarterly estimated payments for 2026 income are due April 15, June 15 and September 15, 2026, and January 15, 2027. You generally need to pay if you expect to owe at least $1,000 after withholding.
Do I have to pay 110% of last year's tax for safe harbor?+
If your 2025 AGI was over $150,000 ($75,000 married filing separately), paying 110% of your 2025 tax through withholding and on-time estimates generally avoids an underpayment penalty. Paying 90% of your 2026 tax also works.
Can I contribute to a Solo 401(k) if I also have a W-2 contract?+
Yes, but the $24,500 employee deferral limit is per person, shared across all your 401(k) plans in 2026. Employer contributions to the Solo 401(k) are based on your self-employment profit.
Can I deduct a home office?+
If part of your home is used regularly and exclusively for business, the simplified home office deduction is $5 per square foot up to 300 square feet ($1,500 max).
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