Question 1

How much more does a 1099 contractor need to earn than a W-2 employee?

Accepted Answer

Generally 30–50% more gross income to match the same W-2 take-home pay. The gap comes from self-employment tax (extra 7.65% vs W-2 FICA), benefits you now pay yourself (health insurance, 401k match, disability), and PTO opportunity cost.

Question 2

Is 1099 or W-2 better for taxes?

Accepted Answer

W-2 has lower FICA burden (employer pays half of the 15.3%). But 1099 workers can deduct business expenses on Schedule C, contribute more to retirement accounts (Solo 401k up to $69,000/year), and have more flexibility in tax planning.

Question 3

What is the break-even hourly rate for 1099 vs W-2?

Accepted Answer

Take your W-2 salary, add your benefits replacement cost and SE tax premium, then divide by realistic billable hours (typically 1,200–1,500/year). For an $80,000 W-2 salary with standard benefits, break-even is often $60–70/hr as a 1099 contractor.

Question 4

Do 1099 contractors pay more in taxes than W-2 employees?

Accepted Answer

Generally yes — 1099 workers pay the full 15.3% SE tax vs. 7.65% for W-2 employees (whose employer covers the other half). However, 1099 workers can deduct the other half of SE tax above-the-line and have access to more business deductions.

W-2 vs 1099 Calculator