Is 1099 or W-2 better for take-home pay?
On the identical headline dollar figure, W-2 nets more. A 1099 contractor pays the full 15.3% self-employment tax (both the employee's and the employer's share of Social Security and Medicare) instead of the 7.65% a W-2 employee pays, with the other 7.65% covered by the employer without ever touching the paycheck. A 1099 contractor has to bill meaningfully more than an equivalent salary to end up with the same take-home.
What is the difference between a 1099 contractor and a W-2 employee?
A W-2 employee has income and FICA tax withheld by an employer, who also pays a matching share of Social Security and Medicare on the employee's behalf. A 1099 contractor receives gross pay with nothing withheld, owes quarterly estimated tax themselves, and pays self-employment tax covering both halves of FICA -- a legal and tax distinction, not just a paperwork one, and misclassifying a role either direction has real consequences for both parties.
How much more should I charge as a 1099 contractor to match a W-2 salary?
It depends on income level and state, but on a $75,000 example in a no-income-tax state, a contractor needs to bill noticeably more than $75,000 to net the same take-home pay a W-2 employee gets from a $75,000 salary -- see the exact figure in the comparison below. The gap is self-employment tax plus the lost employer benefits (health insurance contribution, 401(k) match, paid time off) this calculator does not price in.
Can I deduct business expenses as a 1099 contractor?
Yes -- ordinary and necessary business expenses reduce your net profit before self-employment tax and income tax apply, which is the main lever a 1099 contractor has that a W-2 employee doesn't. This comparison assumes zero deductible expenses to isolate the self-employment-tax effect cleanly; a contractor with real expenses would net more than shown here.
Does self-employment tax replace FICA?
Self-employment tax is FICA, just paid differently. A W-2 employee's 7.65% FICA withholding is matched by an equal employer contribution the employee never sees. A 1099 contractor's 15.3% self-employment tax is that same combined rate, both halves, paid entirely by the contractor -- half of it is deductible against income tax, but it is still cash out of pocket the W-2 employee's paycheck never reflects.
