1099 vs W‑2 Paycheck Calculator 2025 – Net Pay & Taxes Compared
Compare 2025 net pay for 1099 contractors vs W‑2 employees. Model self‑employment tax, deductions, benefits value, and take‑home differences.
1099 vs W‑2 Paycheck Calculator 2025 – Net Pay & Taxes Compared
Introduction
Hourly rate isn’t the whole story. Compare net pay after self‑employment tax, deductions, and the value of employer benefits to decide between 1099 and W‑2 in 2025.
Inputs
- Hourly/annual pay for both options
- Benefits value (health, retirement match, PTO)
- Deductions for 1099 (home office, equipment, mileage)
Examples
- $70/hr 1099 vs $55/hr W‑2: 1099 pays both sides of FICA but can deduct expenses
- W‑2 with rich benefits may beat slightly higher 1099 rates
Tips
- Price in lost PTO and benefit costs for 1099
- Quarterly estimated taxes required for 1099
- Consider S‑Corp for high profit (consult a CPA)
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CTA: Compare Your Offer
Enter your rates and benefits to see which path leaves you with more after‑tax pay in 2025.
What Changes Between 1099 and W‑2 (Deep Dive)
- FICA: W‑2 employees pay 7.65% (SS + Medicare) and employers pay a matching 7.65%; 1099 contractors pay both halves (self‑employment tax), then deduct the employer‑equivalent half above the line
- Benefits: W‑2 often includes health coverage, retirement match, PTO; 1099 must self‑fund equivalents
- Deductions: 1099 can deduct ordinary and necessary business expenses; W‑2 unreimbursed employee expenses generally not deductible under current rules
Step‑by‑Step Comparison
- Normalize hours and expected utilization (bench time reduces realized 1099 income)
- For 1099: subtract business expenses; compute SE tax; subtract above‑the‑line half
- For W‑2: add employer benefits value (health premiums, 401(k) match, paid holidays/PTO)
- Apply federal/state taxes to both scenarios
- Compare net dollars and risk factors (stability, admin time, benefits portability)
Examples (Illustrative)
Example A: $70/hr 1099 vs $55/hr W‑2
- 1099: high gross but pays both sides of FICA; deducts equipment, home office, mileage
- W‑2: lower base but includes $8k health subsidy + 4% 401(k) match + 20 paid days
- Outcome varies by expenses and tax situation; calculator reveals breakeven
Example B: Project‑Based Consulting vs Full‑Time Offer
- Consulting: 9 months billable/yr; higher hourly
- W‑2: steady pay, vesting equity, promotion path
- Consider effective hourly after PTO and benefits; sometimes W‑2 wins on total comp
Optimization Playbook
- 1099: set aside 25–35% for taxes; make quarterly estimates; consider Solo 401(k) and HSA
- W‑2: capture full 401(k) match; use FSA/HSA if offered; leverage group disability/life coverage
Common Pitfalls
- Underestimating bench time or admin time for 1099
- Ignoring employer‑paid half of FICA when comparing rates
- Valuing equity at grant value without discounting for risk/vesting
- Overlooking PTO value (effective hourly increases with paid days)
Frequently Asked Questions
Q: How do I convert salary to an equivalent 1099 rate?
A: Add employer FICA, health subsidy, PTO value, and retirement match to salary, then divide by expected billable hours.
Q: Can I deduct home office as 1099?
A: Yes if it meets IRS “exclusive and regular use” rules; track square footage and shared expenses.
Q: Is it worth forming an S‑Corp?
A: Potentially for high profits; it can reduce SE tax on distributions. Get CPA advice.
Checklist (Copy/Paste)
- Estimate annual billable hours and bench time
- Price equipment, software, and liability insurance
- Add employer benefits value to W‑2
- Model both tax scenarios and compare net
- Revisit after offers change or life events