Contractor Income vs. W-2 Employment Tax Calculator (USA)
The tax impact of earning income can differ significantly depending on whether you are classified as an independent contractor (1099) or a W-2 employee. This tool illustrates some key federal tax differences based on your inputs.
Key Tax Differences:
- Self-Employment (SE) Tax vs. FICA (Payroll) Tax: Independent contractors pay both the employer and employee portions of Social Security and Medicare taxes. W-2 employees split these taxes with their employer.
- Business Expense Deductions: Independent contractors can deduct ordinary and necessary business expenses to reduce taxable income. W-2 employees have limited ability to deduct unreimbursed expenses.
- Health Insurance: Self-employed individuals may deduct health insurance premiums.
- Retirement: Contribution options and deduction rules differ for self-employed vs. employees.
* Uses estimated 2025 federal Social Security (12.4% total) and Medicare (2.9% total) tax rates, and the 2024 Social Security wage base ($168,600). Uses user-provided estimated marginal income tax rate. Actual tax liability depends on many factors.
Enter Your Income and Expense Assumptions
* Enter amounts for a hypothetical annual income. W-2 employees typically have limited or no deductible business expenses.
Contractor vs. W-2 Tax Comparison Results
Comparison of estimated federal tax impact based on your inputs for a hypothetical gross income earned as an Independent Contractor vs. W-2 Employee.
* Uses estimated 2025 SS/Medicare rates and 2024 SS wage base ($168,600). Uses user-provided estimated marginal income tax rate. Actual tax liability varies.
Estimated Tax Comparison:
Independent Contractor (1099)
Gross Income: $0.00
Business Expenses: $0.00
Health Insurance Deduction: $0.00
Retirement Deduction: $0.00
Net Earnings from Self-Employment: $0.00
Self-Employment Tax Basis (92.35% of Net Earnings): $0.00
Self-Employment Tax: $0.00
Deduction for One-Half of SE Tax: $0.00
Adjusted Gross Income (Simplified): $0.00
Estimated Federal Income Tax: $0.00
Total Estimated Tax: $0.00
W-2 Employee
Gross Income (Wages): $0.00
Deductible Business Expenses: $0.00
Health Insurance Deduction: $0.00 (Assuming pre-tax or not deductible)
Retirement Deduction: $0.00
Taxable Wages for FICA: $0.00
Social Security Tax (Employee Portion): $0.00
Medicare Tax (Employee Portion): $0.00
Social Security Tax (Employer Portion): $0.00
Medicare Tax (Employer Portion): $0.00
Total FICA Tax (Employee + Employer): $0.00
Adjusted Gross Income (Simplified): $0.00
Estimated Federal Income Tax: $0.00
Total Estimated Tax (FICA + Income Tax): $0.00
Tax Difference (Contractor - W-2): $0.00 ()