How is take-home pay calculated?

Take-home pay is your gross salary minus federal income tax (based on tax brackets and standard deduction), Social Security tax (6.2% up to $184,500), Medicare tax (1.45% + 0.9% above $200K), and state/local income taxes. Our calculator computes all of these automatically.

Which states have no income tax?

Nine states have no personal income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. However, some make up revenue through higher property taxes, sales taxes, or other fees.

Is a higher salary always better if I move states?

Not necessarily. A $100K salary in a low-cost, low-tax state can provide more purchasing power than $130K in a high-cost, high-tax state. Always compare take-home pay AND cost of living. Our salary equivalent calculator does this math for you.

What’s the difference between marginal and effective tax rate?

Your marginal rate is the tax rate on your last dollar earned (the bracket you’re in). Your effective rate is total tax divided by total income — the actual percentage you pay overall. The effective rate is always lower because your first dollars are taxed at lower brackets.

Do these calculators account for deductions?

Our calculators use the 2026 standard deduction ($16,100 single / $32,200 married). If you itemize deductions, your actual tax bill may be lower. Consult a tax professional for personalized advice.

How accurate are state tax estimates?

These are estimates based on top marginal rates and simplified effective rate calculations. Actual state taxes depend on specific bracket structures, deductions, credits, and local taxes. Use these for comparison purposes — consult a CPA for exact figures.

1099 vs W-2: The Real Math of Going Freelance in 2026

If you're considering leaving a W-2 job for freelance work, you need to understand the real math, not the headline number. A $100,000 1099 contract is not equivalent to a $100,000 W-2 salary. After self-employment tax, lost employer benefits, and the cost of replicating those benefits independently, the same dollar of 1099 income produces substantially less take-home value. This guide quantifies the gap and identifies the inflection point where freelancing actually makes financial sense.

The 7.65% You Don't See on Your Paystub

W-2 employees pay 7.65% in FICA: 6.2% Social Security and 1.45% Medicare. What most employees don't realize: their employer pays an additional 7.65% on their behalf — Social Security and Medicare on the same wages. The full FICA burden is 15.3%; the employee sees only half on their paystub.

When you become self-employed, you pay both halves. Self-employment tax is 15.3% of 92.35% of net SE income, working out to ~14.13% of net earnings. On $100,000 of net 1099 income, that's $14,130 — roughly $7,650 more than a W-2 employee at the same gross would pay in FICA.

Counterargument: half of SE tax is deductible from your AGI (the SE tax deduction). On $14,130 of SE tax, that's $7,065 of AGI reduction. At a 22% federal marginal rate, this saves $1,554 in income tax. So the net cost of going from W-2 to 1099 on the FICA dimension is approximately $7,650 - $1,554 = $6,096 per year on $100K of income.

Implication for freelance pricing: to net the same as a W-2 employee on $100K, you need to gross approximately $106,100 in 1099 income — a 6% premium. And that's just for SE tax. Other costs (benefits, lost paid time off, retirement match) push the required premium much higher.

Lost Employer Benefits: The Big One

Employer-paid benefits are a major chunk of W-2 compensation that 1099 contractors must self-fund. Health insurance is the largest single cost: a family policy on the ACA marketplace runs $20,000-$25,000 per year out-of-pocket vs $5,000-$8,000 for the employee portion of an employer plan. The employer typically pays $15,000-$20,000 of the premium directly.

401(k) match: most large employers match 3-6% of salary, fully or partially vesting over 1-4 years. A $100K W-2 employee with a 5% match captures $5,000/year of free retirement contributions. As a 1099 contractor, this becomes self-funded — you can contribute much more to a Solo 401(k) ($69,000 limit vs $23,500 for employees), but you're contributing your own money rather than getting employer money.

Other benefits often overlooked: paid time off (typically 2-5 weeks per year, worth 4-10% of salary), parental leave (12-16 weeks paid in some companies), disability insurance ($1,500-$3,000/year if purchased independently), life insurance, FSAs and HSAs with employer contributions, professional development budgets, commuter benefits, and free perks (food, gym, etc).

Total employer-funded benefits typically run 25-35% of base salary for a high-quality employer. A $100K W-2 job with strong benefits is closer to $130K of total compensation. The 1099 contractor must replicate these or accept lower effective compensation.

The Required Rate Premium

Combining all the cost differences, the typical freelancer needs to charge 30-50% more than the equivalent W-2 salary to net the same total compensation. Below 30%, you're losing real money compared to a W-2 job. Above 50% (and especially with strong tax planning), freelancing is economically superior.

Detailed breakdown for $100K W-2 baseline: SE tax cost: $6,100; health insurance gap: $15,000; 401(k) match lost: $5,000; PTO (4 weeks): $7,700 (calculated as 4/52 × $100K); disability/life insurance: $2,500; professional fees (CPA, software, legal): $2,500; total cost of going freelance: $38,800.

To net the same as a $100K W-2 employee, you need to gross $138,800 as a 1099 — a 38.8% premium. This assumes you can buy good ACA coverage, have a stable client base, and don't suffer slow months with no income. Add a 10% buffer for billable-hours dilution (administration, client acquisition) and the practical premium is closer to 50%.

Inflection point: at $200K of 1099 income, the SE tax savings start to be offset by the QBI deduction (20% of net business income, available to 1099 not W-2). At $300K+, the Solo 401(k) and SEP-IRA contribution limits ($69K vs $23.5K W-2) start to be a significant retirement advantage. Above $500K, S-Corp election can dramatically reduce SE tax. The math gets better as income grows — but at the same income level, W-2 typically wins.

The QBI Deduction Advantage

Section 199A's Qualified Business Income (QBI) deduction is a major freelancer-only advantage. Available to sole proprietors, partnerships, S-corps, and LLCs but NOT W-2 employees, the deduction is 20% of qualified business income with phase-outs above $200K single / $400K MFJ.

Concrete example: a freelancer with $150,000 of net SE income claims a $30,000 QBI deduction (20% of $150K). At a 24% federal marginal rate, this saves $7,200 — partially offsetting the 1099 tax disadvantages. A W-2 employee at the same gross income gets no QBI deduction.

Phase-out complexity: above $200K single / $400K MFJ taxable income, two issues arise. (1) Specified Service Trades or Businesses (SSTBs) — including consulting, law, medicine, accounting, financial services, performing arts — start phasing out the deduction, fully eliminating it at $250K single / $500K MFJ. (2) Non-SSTB businesses become subject to a wage and qualified property test that limits the deduction to the greater of 50% of W-2 wages paid OR 25% of W-2 wages plus 2.5% of qualified property basis.

Strategic implications: low-income freelancers (below $200K) get the full QBI deduction without restriction — straightforward 20% off taxable income. SSTB freelancers above the threshold lose the deduction entirely, which substantially worsens the 1099 vs W-2 comparison. Non-SSTB freelancers (e.g., software developers building products, designers selling templates) above the threshold can structure for QBI by paying themselves W-2 wages through an S-corp.

The Always-Working Tax

W-2 employees get paid for vacation, sick days, and federal holidays. A typical employee with 4 weeks PTO and 10 federal holidays works ~234 days of the 261 weekday year — 89.7% of weekdays. They get paid 100% of their salary while working only 90% of the days.

Freelancers typically get paid only for hours worked. A vacation, sick day, or holiday means zero income that day. To match a W-2 employee's gross pay while taking equivalent time off, freelancers need to charge ~11.5% more per billable hour just to compensate for unpaid days off. Most freelancers don't take this much time off because every day off is direct income loss — leading to the well-documented problem of freelancer burnout.

Bench time (between contracts) is another hidden cost. The average freelance project ends, and there's typically a 2-4 week gap before the next one starts. Across a year of 4-6 projects, this might be 8-16 weeks of unbilled time. Even successful freelancers typically lose 20-30% of potential billable hours to bench time.

Add in administrative overhead (invoicing, contracts, marketing, business development), and the typical freelancer's billable utilization is 50-65% of their working hours — vs nearly 100% utilization for W-2 employees on the company's clock. This means freelancers must charge 1.5-2x the equivalent hourly rate just to gross the same amount.

When Freelancing Wins

Despite the costs, freelancing genuinely wins in several scenarios. High-skill specialists who can charge premium rates ($150-$300+/hour) clear the cost hurdle easily. The premium captures both the SE tax cost and the time-off tax with margin to spare. Software architects, specialized consultants, and senior creative professionals fit this profile.

Multiple-income-stream freelancers win by reducing single-client risk. A freelancer with 3-4 concurrent clients earning a steady $200K total has lower income volatility than the average employee (who depends entirely on one employer). Layoff risk drops to zero — no single client can fire you and end your income.

Significant business deductions: home office, equipment, vehicle, travel, software subscriptions, and meals add up. A freelancer with $150K gross and $30K of legitimate deductions has $120K of taxable income. Plus the QBI deduction. Plus aggressive retirement contributions. Effective tax rate can be substantially lower than the equivalent W-2 employee.

Lifestyle premium: freelancing offers schedule flexibility, location independence, and the ability to choose clients. These have real economic value but aren't captured in dollar comparisons. For someone who values these highly (parents with young children, digital nomads, creative professionals), the financial premium of W-2 employment may not justify the loss of flexibility.