Why a 1099 offer has to pay more
A $100,000 W-2 salary and a $100,000 contract are not the same deal. As an employee, your employer pays half of your Social Security and Medicare tax and usually covers benefits. As a 1099 contractor, you pay the full 15.3% self-employment tax yourself, buy your own equipment and insurance, and get no paid time off. The calculator compares what actually lands in your pocket after federal tax.
What the calculator counts
| W-2 employee | 1099 contractor | |
|---|---|---|
| Social Security + Medicare | 7.65% (employer pays the other 7.65%) | 15.3% on 92.35% of profit |
| Business expenses | Paid by the employer | Paid by you, but deductible |
| Deduction for half of SE tax | — | Yes |
| 20% QBI deduction | — | Usually yes |
| Standard deduction and brackets | Same | Same |
W-2: $6,885 FICA + $10,970 income tax = $17,855 of tax → $72,145 take-home.
1099: $104,000 profit; SE tax plus income tax (after the half-SE-tax and QBI deductions) ≈ $23,584 → $80,416 take-home.
The contract pays about $8,300 more in cash. To merely match the W-2 offer, it would need to pay about $98,100.
What the numbers leave out
The comparison is cash after federal tax. Before you decide, put a dollar value on what the W-2 job includes and the contract does not:
- Health insurance. Employer-paid premiums can be worth several thousand dollars a year. If you will buy your own, include the premiums in the expenses field.
- Retirement match. A 4% 401(k) match on $90,000 is $3,600 a year.
- Paid time off and holidays. A contractor who takes four weeks off earns nothing for them.
- Stability. Contracts can end with little notice, and there is no unemployment insurance.
- State tax. State income tax applies to both; some cities also tax self-employment income.
Is it really a contractor role?
Worker classification is not a choice the company gets to make freely. If a company controls how, when and where you work like an employee, the IRS and many states may treat you as one. If an offer looks like a full-time job paid on a 1099, that is worth a question before you sign.
Frequently asked questions
Why does the 1099 side get a QBI deduction?
Most self-employed people can deduct up to 20% of their qualified business income. For 2026 it applies in full below $201,750 of taxable income ($403,500 married filing jointly) and phases down above that for service businesses. The calculator applies it automatically.
Should I set up an S corporation?
At high profit levels, an S corp can reduce self-employment tax. It adds payroll, bookkeeping and state costs, so compare the savings with an accountant first.