Real-World Example: Freelancer vs Employee Take-Home Pay

Consider a software professional offered either a W-2 salary of $100,000 or a 1099 contract role.

W-2 Scenario

With a $100,000 salary, the employee pays 7.65% in FICA taxes, federal income tax based on filing status, and state income tax. Employer benefits such as health insurance and 401(k) matching add value.

1099 Scenario

As a 1099 contractor with $130,000 gross income and $15,000 in business expenses, the contractor pays 15.3% SE tax on 92.35% of net earnings, can deduct half of SE tax, health insurance, and may claim the QBI deduction.

The Break-Even Rate

In many cases, a 1099 contractor needs to charge roughly 25% to 35% more than the W-2 hourly equivalent to achieve the same net take-home pay after taxes and benefits.

Use the Calculator

Enter your own numbers on the home page calculator to get a personalized comparison.