Independent Contractor vs Employee Tax Liability Calculator
Compare your total federal tax liability as an independent contractor (1099) versus a W-2 employee. See the impact of self-employment tax, the QBI deduction, and employer-paid FICA on your bottom line.
Formulas Used
Independent Contractor:
- Net SE Income = Gross Income − Business Expenses
- SE Tax Base = Net SE Income × 0.9235 (IRS statutory reduction)
- SE Tax = min(SE Base, $168,600) × 12.4% + SE Base × 2.9% + max(0, SE Base − threshold) × 0.9%
- SE Tax Deduction = SE Tax × 50%
- AGI = Net SE Income − SE Tax Deduction − Retirement − Other Deductions
- QBI Deduction = Net SE Income × 20% (IRC §199A)
- Taxable Income = max(0, AGI − Standard Deduction − QBI Deduction)
- Total Tax = Federal Income Tax (brackets) + SE Tax
W-2 Employee:
- Employee FICA = min(Gross, $168,600) × 6.2% + Gross × 1.45% + max(0, Gross − threshold) × 0.9%
- AGI = Gross Income − Retirement − Other Deductions
- Taxable Income = max(0, AGI − Standard Deduction)
- Total Tax = Federal Income Tax (brackets) + Employee FICA
2024 Federal Tax Brackets (Single / MFJ / HOH): 10%, 12%, 22%, 24%, 32%, 35%, 37% — applied progressively per IRS Publication 505.
Assumptions & References
- Tax year 2024. Federal taxes only — state/local taxes not included.
- Self-employment tax rate: 15.3% on 92.35% of net SE income (IRS Schedule SE).
- Social Security wage base: $168,600 (2024, IRS Notice 2023-75).
- Additional Medicare Tax: 0.9% on income above $200,000 (single/HOH) or $250,000 (MFJ) per IRC §3103.
- QBI deduction: 20% of qualified business income per IRC §199A. Phase-outs for high-income specified service trades not modeled.
- Standard deductions: $14,600 (single), $29,200 (MFJ), $21,900 (HOH) per IRS Rev. Proc. 2023-34.
- Retirement limit: $69,000 (2024 total contribution limit, IRS IR-2023-203).
- Employer FICA (7.65%) is shown for informational purposes only — it is not a cost borne by the employee.
- Does not account for state income taxes, AMT, credits, health insurance deductions, or benefit valuations.
- References: IRS Publication 505, IRS Schedule SE, IRC §§ 164(f), 199A, 3101–3103, 3111.