What counts as nonemployee compensation
Nonemployee compensation covers fees, commissions, and other payments a business makes to you for services, as long as you’re not on that business’s payroll. Common examples include:
- Freelance writing fees
- Consulting income
- Payments for contract labor, like repairs or deliveries.
- Most income you earn as a side hustle that you do not receive either a W-2 as an employee or a 1099-MISC.
1099-NEC vs. 1099-MISC
| Form | What it reports |
|---|---|
| 1099-NEC | Nonemployee compensation like fees, commissions, and contract labor |
| 1099-MISC | Rents, royalties, prizes and awards, and certain other payments |
Source: Internal Revenue Service
The 2026 threshold change
| 2025 | 2026 |
|---|---|
| $600 | $2,000 |
For 2025 payments, businesses must send a 1099-NEC once they’ve paid you $600 or more. That threshold rises to $2,000 for payments made in 2026 and will be adjusted for inflation each year after. The higher threshold means fewer 1099-NECs overall, but it doesn’t change what income you owe tax on.
Self-employment tax on 1099-NEC income
Because no employer withholds taxes from 1099-NEC pay, you’re responsible for both income tax and self-employment tax (Social Security taxes and Medicare taxes) on it. The self-employment tax rate is 15.3% on net earnings from self-employment, subject to applicable limits and adjustments.
How to report 1099-NEC income
If you also have a W-2 job, report both incomes on the same return. They don’t cancel each other out; you just add the totals together.
