How taxes work for young adults (W-2, 1099, and the boring rest)
Taxes pay for roads, schools, courts, the military, and basically every public thing. You do not have to like that, but you do have to handle them.
Here is the part that actually matters when you are 18 to 25.
You are an employee
Your employer withholds taxes from each paycheck and reports your wages. They send you a W-2 form in January.
You are a contractor
Nothing is withheld. You owe everything yourself at tax time. They send you a 1099 form in January.
Riley spent the year working two ways:
- W-2 job: $24,000. Federal/state/Social Security/Medicare withheld throughout the year.
- 1099 freelance: $6,000. Nothing was withheld.
At tax time, Riley owes federal/state on the full $30,000, plus self-employment tax (~15.3%) on the $6,000. That is an extra $1,800–2,200 they did not see coming.
If you do any 1099 work, set aside 25–30% of every payment in a separate savings account.
A refund is not free money
A refund means you over-paid throughout the year. The IRS held your money interest-free, then gave it back. Nice when it shows up — but not magic.
Owing a small amount is fine too. It means you used your money during the year instead of lending it to the government for nothing.
The standard deduction
Most young adults take the standard deduction — a flat amount that lowers your taxable income before tax is calculated.
For single filers in 2025, it is about $15,000. So if you earned $30,000, only ~$15,000 is actually taxed. Do not bother itemizing unless you own a house, donated a lot, or have huge medical bills.
Free filing (really free)
If you earned under about $84,000, you qualify for IRS Free File — actually free, not "free" with surprise upsells.
Search "IRS Free File" directly. Do not click ads.
This week
- Pull up your W-4 at work. Check that your filing status is correct.
- If you do freelance work, open a separate savings account for tax money.
- Save your W-2s and 1099s somewhere you will find them in April.