Is it better to be 1099 or W-2?

For taxes alone, W-2 is simpler and lighter. But 1099 work brings deductions and flexibility a W-2 doesn't. The right call depends on the pay difference and the expenses you can write off.

Do 1099 workers pay taxes quarterly?

Usually yes — if you'll owe $1,000+ for the year after withholding, you make four estimated payments. A W-2 employee's withholding handles it automatically instead.

Freelancer taxes

1099 vs W-2 taxes: why freelancers pay more

Updated June 2026·2 min read·Checked against IRS Rev. Proc. 2025-32

Earn the same amount as an employee and as a freelancer, and you'll owe different tax — the freelancer more. The main reason is self-employment tax, plus a couple of other differences. Here's what changes when your income moves from a W-2 to a 1099.

Key takeaways

✓1099 income owes the full 15.3% self-employment tax; a W-2 employee pays half (7.65%).
✓No one withholds for you — you make quarterly payments yourself.
✓But you get deductions an employee can't, which narrows the gap.

Want your exact number? Run it free in 30 seconds.

Open the calculator →

Self-employment tax is the big difference

A W-2 employee pays 7.65% toward Social Security and Medicare, and their employer quietly pays the other 7.65%. As a freelancer you're both halves, so you pay the full 15.3% on 92.35% of your profit. That single difference is why 1099 income feels so much heavier at the same pay. (You do get to deduct half of it against income tax.)

No one withholds for you

A W-2 job withholds tax from every paycheck, so April is usually a small settle-up. On a 1099, nothing is withheld — the full bill is yours to set aside and pay in four quarterly installments. That's a cash-flow shift as much as a tax one: budget for it, or the due dates sting.

Deductions even it out

It's not all downside. As a freelancer you can deduct business expenses, a home office, self-employed health insurance, and retirement contributions, and take the 20% QBI deduction — most of which a W-2 employee can't touch. A well-run freelance business reclaims a real chunk of the gap.

What it means for your set-aside

Net of everything, a freelancer at the same gross income still owes more than an employee — so set aside more. The 25–35%-of-profit rule of thumb exists precisely because of self-employment tax. Run your numbers in the calculator for the exact figure.

Frequently asked questions

Because they owe self-employment tax — the full 15.3% for Social Security and Medicare — instead of the 7.65% a W-2 employee pays (the employer covers the other half). 1099 income also has no withholding.

Self-employment tax calculator →Self-employed tax deductions →How much to set aside →

A planning estimate, not tax advice. Figures use IRS Rev. Proc. 2025-32 (2026). Confirm decisions with real money on the line with a CPA or enrolled agent.