W-2 vs 1099 calculator
Enter the same annual amount paid as wages or as contract revenue. The estimate shows the W-2 paycheck after federal tax and 7.65% FICA beside the 1099 estimate after the 15.3% self-employment tax and income tax. For quarterly payments on contractor income, this is a starting point only.
Why the two sides differ
An employee pays 7.65% of wages in FICA and the employer pays a matching 7.65% you never see. A contractor pays both halves as the self-employment tax: 12.4% Social Security on net earnings up to the 184500 wage base and 2.9% Medicare with no cap (IRS Schedule SE).
The contractor side gets offsets employees do not. Net earnings are 92.35% of net profit, half the SE tax is deductible before income tax, and real-world business expenses reduce profit itself. This page models the first two; expenses depend on your situation.
Cash flow differs too. Employees get withholding every paycheck. Contractors must send quarterly estimated payments or face underpayment penalties, which is why the raw take-home gap understates the discipline a 1099 role demands.
Out of scope here: state tax, the QBI deduction, health benefits, employer retirement match and worker-classification rules (irs.gov/worker).
Common questions
Why is the contractor tax rate 15.3% instead of 7.65%?
A W-2 employee pays 6.2% Social Security plus 1.45% Medicare and the employer pays a matching share that never appears on the paycheck. A 1099 worker is both sides at once: 12.4% Social Security on net earnings up to the 184500 wage base and 2.9% Medicare with no cap, equal to 15.3%.
What is the 0.9235 factor on the contractor side?
Self-employment tax applies to net earnings, which IRS Schedule SE defines as 92.35% of net profit. The reduction approximates the employer-half treatment employees get automatically.
What is not in this estimate?
State income tax, the qualified business income deduction, business expenses, retirement contributions, health insurance and quarterly estimated payments are out of scope. Contractors must also pay tax quarterly; employees get withholding handled by the employer.