Gross vs Net Income for Freelancers and 1099 Contractors
Self-employed gross vs net is completely different from W-2 gross vs net. A W-2 employee pays 7.65% FICA. A self-employed person pays 15.3% SE tax on top of income tax. Here is every step of the math with a real $100k freelancer example.
The 1099 Reality: You Pay Both Sides of FICA
W-2 Employee
SS: 6.2% employee only
Medicare: 1.45% employee only
Total FICA: 7.65%
Employer pays matching 7.65% on your behalf
Self-Employed (1099)
SS: 12.4% (both halves)
Medicare: 2.9% (both halves)
Total SE Tax: 15.3%
Applied to 92.35% of net SE earnings; half deductible above line
The 0.9235 factor: you multiply net SE earnings by 0.9235 before applying the 15.3% rate. This approximates the effect of the above-the-line deduction for half of SE tax - you are not taxed on the portion of earnings represented by the employer half of FICA.
Worked Example: $100k Gross Revenue, $15k Business Expenses
Gross 1099 Revenue
Total payments received across all clients
$100,000
Business Expenses (Schedule C)
Home office, software, travel, professional fees
-$15,000
Net SE Earnings (Schedule C Line 31)
Your profit before SE tax
$85,000
SE Tax Base (x 0.9235)
$85,000 x 0.9235 - the 0.9235 factor
$78,498
SE Tax (15.3%)
From Schedule SE - Social Security 12.4% + Medicare 2.9%
$12,010
Half-SE Deduction
Above-the-line adjustment on Schedule 1 Line 15
-$6,005
Adjusted Gross Income (AGI)
$85,000 - $6,005 half-SE deduction
$78,995
QBI Deduction (20% of QBI, est.)
Section 199A: 20% of $85,000 Schedule C profit
-$17,000
Standard Deduction (est. 2026)
Single filer, 2026 approximate figure
-$15,000
Taxable Income
$78,995 - $17,000 QBI - $15,000 std deduction
$46,995
Federal Income Tax (12-22% bracket)
Approx. using 2026 single brackets
-$5,390
Total Tax (SE + Income)
$12,010 SE + $5,390 income tax
-$17,400
Net Annual Income
$100,000 revenue - $15,000 expenses - $17,400 total tax
$67,600
Effective Total Rate
Total tax as % of gross revenue
20.5%
Quarterly Estimated Tax Deadlines
Q1
Jan - Mar
Due April 15
Q2
Apr - May
Due June 16
Q3
Jun - Aug
Due Sept 15
Q4
Sep - Dec
Due Jan 15
Safe harbor: pay 100% of prior-year tax liability (110% if prior-year AGI exceeded $150,000) spread across four equal payments to avoid underpayment penalties.
When an S-Corp Election Saves SE Tax
A sole prop pays SE tax on 100% of net earnings. An S-Corp owner splits income between a “reasonable salary” (subject to FICA) and distributions (not subject to SE tax). At $150k+ net earnings, the S-Corp election can save meaningful SE tax, but there are payroll costs, accounting costs, and more compliance complexity. The math depends heavily on your income level.
| Structure | Net SE Earnings | SE / Payroll Tax | Approx. Saving |
|---|---|---|---|
| Sole Prop / LLC | $150,000 | $21,195 | Baseline |
| S-Corp ($80k salary + $70k dist.) | $150,000 | $12,240 | ~$9,000 |
S-Corp payroll costs (~$1,000-$2,000/year), state fees, and accounting reduce the net saving. For a full analysis, see llcvsscorp.com.