Compare the tax burden between W2 employee and 1099 contractor status on the same income. See the real tax difference with all deductions applied.
1099 pays $1,452 less in tax
| W2 FICA (employee share) | $7,650 |
| W2 Federal Income Tax | $14,261 |
| W2 State Tax | $5,000 |
| W2 Total Tax | $26,911 |
| W2 Take-Home | $73,090 |
| 1099 Self-Employment Tax | $14,130 |
| 1099 SE Tax Deduction | $7,065 |
| 1099 QBI Deduction | $15,987 |
| 1099 Federal Income Tax | $6,329 |
| 1099 Total Tax | $25,459 |
| 1099 Take-Home | $61,541 |
| Extra Tax as Contractor | $1,452 |
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W2 Tax = FICA (7.65%) + Federal Income Tax + State Tax
1099 Tax = SE Tax (15.3%) + Fed Tax (after deductions) + State Tax
Deductions: ½ SE Tax, Business Expenses, Health Insurance, QBI (20%)
Contractors pay an extra 7.65% self-employment tax (the employer's share of FICA). On $100k, that's $7,650 more. However, deductions for business expenses and the SE tax deduction partially offset this.
Employers pay 7.65% of wages in FICA (6.2% Social Security + 1.45% Medicare). As a contractor, you pay both halves — 15.3% total.
Yes. Contractors can deduct business expenses, home office, equipment, health insurance premiums, retirement contributions (up to $66k in a Solo 401k), and claim the QBI deduction.
Generally above $50k-$80k in net profit, electing S-Corp status lets you pay a reasonable salary and take remaining profits as distributions (not subject to SE tax), saving thousands.
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.