1099 vs W-2 — How Your Taxes Are Completely Different

W-2: Your employer withholds federal income tax, state income tax, Social Security, and Medicare from every paycheck. You barely see it.

1099: Nothing is withheld. The full payment lands in your account, and you owe taxes on it later. This is the single biggest mental shift new freelancers have to make.

W-2: You pay 7.65% (6.2% Social Security + 1.45% Medicare). Your employer matches it out of their pocket — you never see that half.

1099: You pay both halves yourself — 15.3% total. That's called self-employment tax. It's the most common surprise for new freelancers.

W-2: You take the standard deduction (or itemize) on personal expenses. You can't deduct most work expenses anymore (the 2018 tax law eliminated unreimbursed employee deductions for most workers).

1099: You can deduct legitimate business expenses — home office, mileage, software, equipment, half of SE tax, health insurance, retirement contributions. These reduce both your income tax and your SE tax.

W-2: One annual filing. Done.

1099: One annual filing PLUS quarterly estimated tax payments throughout the year (April 15, June 15, September 15, January 15) if you expect to owe more than $1,000.

1099 freelancers under the income thresholds get a 20% Qualified Business Income deduction — federal income tax only — that W-2 employees don't. This often makes 1099 income tax less than a comparable W-2 salary, even after SE tax.