This page pairs a transparent tax stack with the numbers you can actually control: health premiums, retirement, and state bands. We bake in realistic defaults—then you tune the inputs to match your life.
From salary to contractor pricing
Job posts quote annual salary; clients quote day or hour rates. Translating between them requires net-first thinking: self-employment tax stacks before income tax, and employer-paid items must be re-bought from revenue. Use the interactive section to hold your target employee net constant, then read the freelance side.
Billable days matter
If you only bill 140 days/year, the same net requires a higher headline rate than 180 days. Vacation, sales, and admin are not billable—price them in explicitly.
Why headline salary numbers mislead
A $100,000 W-2 offer is not $100,000 of freely spendable cash. Employers remit 7.65% in FICA on your behalf for Social Security and Medicare (up to the annual wage base for Social Security). You see half on your pay stub; the company pays the other half—money you never touch but that still affects hiring budgets on the employer side.
On the freelance column, Uncle Sam expects both halves from you through self-employment tax, with a mechanics tweak: you generally deduct one-half of self-employment tax before federal income tax. The net effect is rarely a straight 7.65% delta—especially when you cross standard deduction, credit cliffs, and state lines.
State tax is a shape-shifter
Nine states impose no broad-based individual income tax on earned wages, while high-tax coastal hubs can stack double-digit state plus local burdens on top of federal marginal rates. Our selector is a band estimator—fine for comparing scenarios, not for filing. If you need pinpoint accuracy, map your filing status, credits, and itemization to your state's department of revenue rules.
Benefits quietly tilt the scales
Employer-sponsored health coverage often hides $7,000–$9,000 of annual premium on the employer line. A generous 401(k) match is cash-equivalent comp you would otherwise fund from your freelance revenue. The calculator isolates cash in bank versus total comp so you can decide whether the trade is worth it for your risk tolerance, runway, and pipeline.
Worked example: $100,000 salary — what you keep
A single W-2 employee in a ~9% state band (e.g. California-style) earning $100,000 often lands near $72,500 net after federal income tax (~$14,300 in this toy model), state tax (~$5,200), and FICA ($7,650). They may also receive ~$7,500 employer health and ~$3,500 401(k) match—~$11,000 of benefits not in take-home cash. A 1099 freelancer with $100,000 Schedule C profit—after self-employment tax (~$14,130 on typical bases), federal/state tax, marketplace health ($7,200), retirement ($6,000), and expenses ($5,000)—often keeps $58,000–$62,000 cash. The gap is structural, not a rounding error.
| Item | W-2 Employee ($100k) | 1099 Freelancer ($100k) |
|---|---|---|
| Gross / revenue | $100,000 | $100,000 |
| Federal income tax | −$14,300 | −$12,200 (after SE deduction) |
| State tax (illustrative 9%) | −$5,200 | −$5,200 |
| FICA / Self-employment tax | −$7,650 | −$14,130 |
| Health insurance | $0 (employer-paid line) | −$7,200 |
| 401(k) match received | +$3,500 (benefit) | $0 |
| Retirement (Solo 401k) | — | −$6,000 |
| Business expenses | — | −$5,000 |
| ≈ Net cash | ≈ $72,500 | ≈ $58,000 |
Loaded employer cost is higher than salary: **~$7,650** employer FICA plus **~$7,500–$12,000** health and match. Apples-to-apples, **$100k salary ≈ $120k+** employer spend—freelancers must invoice for that stack.
Common mistakes when comparing US net pay
Comparing gross to gross
$100,000 W-2 is not comparable to $100,000 1099 revenue. Employers fund FICA match, health, and retirement. Total comp often runs 15–25% above base salary before equity.
Forgetting the self-employment tax double hit
Employees pay 7.65% FICA on wages under the SS cap. 1099 workers pay 15.3% SE tax on SE income up to the same wage base for SS—$7,650 extra before income tax in many $100k cases.
Ignoring health insurance reality
Employer plans often cost $600–$800/month per person at group rates. ACA individual plans run $500–$700/month with higher deductibles; families can clear $1,500–$2,000/month.
Assuming identical brackets without the SE adjustment
You deduct 50% of SE tax before computing income tax, which can nudge brackets—but it does not erase the extra FICA-like load versus W-2.
Who benefits most from freelancing in the US?
When 1099 tends to win
1099 work is financially advantageous when:
- Your **effective rate** clears **$75/hour** (~**$140k+** annualized on 1,800 billable hours).
- You capture **real business deductions** (gear, travel, home office where legitimate).
- You max **Solo 401(k)** space versus capped W-2 deferrals (limits change yearly—verify IRS).
- You live in a **no-income-tax** state (TX, FL, WA, NV, TN, WY, SD, AK, NH investment caution).
When W-2 is smarter
Staying employee makes more sense when:
- Benefits are rich: **low-deductible health**, **RSUs**, **strong match**, **ESPP**.
- Your freelance equivalent rate would sit **under ~$60/hour**.
- You carry **dependents** on health—ACA family premiums wreck thin margins.
- You rely on **unemployment insurance** between gigs—1099 generally does not qualify.
FAQ
Model net from $120k W-2 with your state and benefits, then raise 1099 revenue until freelance net matches—divide by annual billable hours or days for a rate.
Daily for outcome milestones; hourly with a weekly minimum for support. Either way, show math ex-benefits so procurement sees employer-cost parity.
Employees accrue PTO; contractors fund leave from higher rates. Shrink billable days in your mental model before negotiating.
Use the state tax band control—pick 0% for no-income-tax states, higher bands for CA/NY-style loads.
This page models Schedule C-style economics; LLC taxation still flows to your return. Discuss S-Corp payroll with a CPA when net is high enough.