W-2 vs 1099: How Your Take-Home Pay Differs

A $100,000 W-2 salary and a $100,000 1099 contract are not the same money. The contractor takes home meaningfully less — because they shoulder taxes and costs an employer would normally cover. If you’re comparing an employee offer to contract work, this is the gap that matters.

The big one: self-employment tax

As a W-2 employee you pay 7.65% FICA, and your employer quietly pays the other 7.65%. As a 1099 contractor you’re both, so you pay the full 15.3% self-employment tax(12.4% Social Security up to the wage base + 2.9% Medicare) — see our self-employed taxes guide.

The benefits you stop getting

• Health insurance — no employer plan; you buy your own (often $5,000–$15,000+/yr).
• 401(k) match — gone (though you can open a Solo 401(k) or SEP-IRA).
• Paid time off, sick leave, unemployment insurance — none.
• Equipment, software, expenses — your cost (but often deductible).

The upside of 1099

Contractors can deduct legitimate business expenses, shelter more in self-employed retirement plans, and often command higher rates. The freedom and tax-planning room can outweigh the downsides — if the rate is right.

The rule of thumb

To match a W-2 salary after tax and lost benefits, a 1099 contract usually needs to pay roughly 25–40% more. A $100k salary ≈ a $125k–$140k contract, depending on the benefits you’re replacing.

Estimate it

Model the employee side with our calculator, then add back the employer’s half of FICA and the value of any benefits to get a fair contract-rate comparison.