1099 vs W-2: Which Actually Pays More?
Same gross income, two very different paychecks. A W-2 employee pays half of FICA while the employer silently pays the other half; a 1099 contractor pays the full 15.3% self-employment tax — but can deduct expenses, home office, and a solo 401(k) the employee cannot. Here is the honest comparison.
The tax difference in one table
| Item | W-2 employee | 1099 contractor |
|---|---|---|
| Income tax | Yes (withheld) | Yes (quarterly estimated) |
| Social Security + Medicare | 7.65% (employer pays 7.65%) | 15.3% (you pay both halves) |
| Business expenses | Generally no | Yes — reduce taxable profit |
| 20% QBI deduction | No | Up to 20% of pass-through profit |
| Retirement saving | 401(k) up to $24,500 | Solo 401(k) up to $72,000 |
| Unemployment, workers' comp | Paid by employer | You buy it yourself |
The worked example
On $80,000 of gross income with $5,000 of expenses (single filer): the W-2 side nets about $65,110 after income tax and FICA; the 1099 side nets about $57,899 after the 15.3% self-employment tax and income tax. The W-2 job wins by roughly $7,200 at identical gross — the employer’s half of FICA plus the 20% QBI gap.
That is why the gross rates are rarely comparable: a contractor usually charges more per hour precisely because they carry the tax, benefits, and downtime risk. Use the 1099 vs W-2 calculator to run your own numbers.
The deductions that flip the math
Contractors who track every expense routinely narrow the gap or beat the W-2 side: business mileage at 76¢/mile, the home-office deduction at $5/sq ft, software and equipment, and — the biggest one — a solo 401(k), which lets a $150,000 contractor shelter up to $72,000 a year versus $24,500 as an employee.
Benefits are real money
Health insurance, the employer 401(k) match, paid time off, disability coverage — all of it is compensation you are not seeing as a 1099. Count it on the W-2 side of the comparison, or count what you must buy yourself as expenses on the contractor side.
Run the numbers
Compare your situation with the 1099 vs W-2 calculator, see the self-employment tax line with the SE tax calculator, the take-home with the take-home pay calculator, and the quarterly payments a contractor must plan for with the quarterly tax calculator. Already doing both? The side hustle calculator covers the 1099 portion.