1099 vs W-2: The Complete Tax Comparison Guide

A $100,000 contract on a 1099-NEC does not equal a $100,000 W-2 salary. Understanding the tax mathematics behind employee classification is essential for pricing your freelance rates.

The FICA Difference

On W-2, your employer pays 7.65% of your FICA taxes, and you pay 7.65%. On 1099, you must pay the entire 15.3% self-employment tax yourself.

The Deduction Advantage

While 1099 workers pay more FICA, they gain access to business write-offs (mileage, home office, hardware) and the 20% Qualified Business Income (QBI) deduction, which are unavailable to standard W-2 employees.

Rule of Thumb Pricing Multiple

To match a W-2 salary's net take-home compensation after factoring in employer FICA contributions, health insurance, paid time off, and retirement matches, a 1099 contractor should bill between 1.3x and 1.5x the equivalent W-2 hourly rate.