Why the same gross pay isn't the same take-home

A W-2 employer withholds and pays half of your FICA taxes (6.2% Social Security + 1.45% Medicare) on your behalf — that's an employer cost you never see. A 1099 contractor is both the "employer" and the "employee" for tax purposes, so self-employment tax covers both halves: 12.4% Social Security + 2.9% Medicare = 15.3% total, on 92.35% of net profit.

That's why freelancers are usually advised to charge more per hour than an equivalent salaried role — you're not just replacing the paycheck, you're replacing the benefits and the employer's half of payroll tax too. On the other hand, 1099 income lets you deduct real business expenses and may qualify for the 20% QBI deduction, both of which lower your taxable income in ways W-2 wages don't.

This tool isolates just the tax side of that comparison. It intentionally leaves out health insurance, retirement matching, paid time off, and other benefits — those vary enormously by employer and should be added to a real decision.

Want your actual quarterly 1099 payment estimate? Use the full Quarterly Tax Calculator.

Sources

  • IRS — Self-Employment Tax (Topic 554); Topic 751 (Social Security & Medicare withholding rates)
  • SSA.gov — 2026 Contribution and Benefit Base ($184,500)
  • IRS Rev. Proc. 2025-32 — 2026 federal income tax brackets & standard deduction