1099 vs. W-2 Take-Home Pay: What a Freelancer Really Keeps

A $60,000 job offer and $60,000 of freelance income are not the same money. If you're a W-2 employee, your employer quietly pays half of your Social Security and Medicare tax. If you're a 1099 contractor, you pay both halves yourself, and nobody withholds anything from your payments. Here is what that does to your take-home pay.

The two big differences

1. You pay the employer's share of FICA. A W-2 employee pays 7.65% and the employer pays another 7.65%. A self-employed worker pays the full 15.3% (12.4% Social Security plus 2.9% Medicare). The IRS lets you deduct half of it when figuring income tax, which softens the blow slightly.

2. Nothing is withheld. Your clients pay you in full, so you set the tax money aside and send it to the IRS yourself, usually through quarterly estimated payments.

Worked example: $60,000 W-2 salary vs. $60,000 of 1099 profit

Single filer, no state income tax, 2026 federal rules, no other deductions. For the freelancer, "$60,000" means net profit after business expenses.

W-2 employee1099 freelancer
Income$60,000$60,000
Social Security and Medicare$4,590 (7.65%)$8,478 (self-employment tax)
Federal income tax$5,020$4,511
Total tax$9,610$12,989
Annual take-home pay$50,390$47,011
Monthly~$4,199~$3,918

That is about $3,380 a year less for the same headline number.

How the 1099 column was calculated

  • Self-employment tax: $60,000 × 92.35% = $55,410, then × 15.3% = $8,478
  • Half of that, $4,239, is deducted from income
  • Adjusted income: $60,000 − $4,239 = $55,761
  • Standard deduction (2026, single): $16,100, which leaves $39,661 taxable
  • Federal tax: 10% on the first $12,400 ($1,240) plus 12% on the remaining $27,261 ($3,271) = $4,511

Many self-employed people can also deduct up to 20% of qualified business income. That would lower the federal figure further and is not included here.

What a freelancer needs to charge to match a salary

To take home the same $50,390 a $60,000 employee does, a freelancer needs roughly $64,500 in net profit, about 7 to 8% more. And that is before the things an employer usually covers:

  • Health insurance premiums
  • Retirement contributions or a 401(k) match
  • Paid time off, holidays, and sick days
  • Equipment, software, and a home office

Once you add those, a common rule of thumb is to charge 20 to 30% more than an equivalent salaried rate. Treat that as a starting point, not a rule.

State taxes still apply

The example uses a no-income-tax state. In a state with income tax, add that on top for both columns. Some states and cities also have taxes that apply only to self-employed income.

Setting money aside

Because nothing is withheld, many freelancers put 25 to 30% of each payment into a separate account for taxes. That covers self-employment tax and federal income tax in the example above, with a little room for state tax. Adjust it for your income and state.

Estimated tax payments

Self-employed workers generally pay the IRS four times a year. For the 2026 tax year the usual due dates are April 15, June 15, September 15, and January 15, 2027, shifted when one lands on a weekend or holiday. To avoid an underpayment penalty, you generally need to pay at least 90% of this year's tax, or 100% of last year's (110% if your income was above $150,000).

Run the employee side yourself

Use the PayGauge take-home pay calculator to see what a W-2 salary would pay after taxes in your state, then compare it with what you would keep as a contractor.

This article is for general information, not tax advice. A tax professional can help with deductions and estimated payments specific to your situation.

Location: United States

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