Same dollar figure, very different take-home: a $80,000 W-2 salary and an $80,000 1099 contract leave you with different amounts because of who pays the payroll taxes.
W-2 employee
- Employer withholds your income tax and splits FICA — you pay 7.65%, they pay 7.65%.
- Often comes with benefits (health, 401(k) match, PTO).
- Take-home is what the paycheck calculator shows.
1099 contractor
- No withholding — you pay quarterly estimated taxes yourself.
- You pay both halves of FICA = 15.3% self-employment tax (on 92.35% of net earnings).
- But you deduct business expenses, can take the QBI deduction, and use bigger retirement plans (SEP-IRA, Solo 401k) — which can claw a lot back.
The trade-off
1099 carries more tax (the extra 7.65% employer-side FICA) and no benefits — so contractors generally need a higher headline rate than an equivalent W-2 salary to come out even. The deductions and flexibility are the upside.
Estimate each
For W-2 take-home use the paycheck calculator; for 1099 use the self-employment tax calculator (it includes SE tax + income tax + quarterly set-aside). Background: what FICA is.