Leaving a W-2 job for contracting, or stacking a side business on top of a day job, changes how tax works. Texas has no state income tax on wages, but federal income tax and self-employment tax still apply to business profit.
Self-employment tax is not optional math
Self-employment tax covers Social Security and Medicare for people who work for themselves. It surprises first-year filers who only budgeted for “income tax.” Plan for it when you set prices and draw cash.
Estimates and a simple book habit
Quarterly estimated payments may be required if you will owe enough. A basic bookkeeping habit (even a clean monthly categorization) stops you from guessing your profit in December.
Moreno Financial Services helps new self-employed clients in Kempner, Killeen, and greater Central Texas set up books and file carefully. Start with a free strategy call.
Reviewed August 9, 2026. General educational information only, not individualized tax, legal, accounting, or financial advice. Rules and deadlines can change; verify the current tax year and your facts with a qualified professional.