W-2 vs 1099: what changes if you go freelance

One salary, one expected profit, and the four answers that usually live on four different sites: what you would actually take home, what self-employment tax costs, what to pay each quarter, and when an S corp starts to be worth it.

Go deeper: the take-home calculator, with pre-tax deductions.

Self-employment tax is the part that surprises people

An employer pays half of Social Security and Medicare for you and you never see it. Working for yourself you pay both halves, on 92.35% of your profit, which is 12.4% for Social Security up to $184,500 and 2.90% for Medicare with no cap. Half of it comes back as a deduction, which the figures above already account for.

Go deeper: the full self-employment tax calculator.

Nobody withholds for you any more

The tax above is not due in April. It is due in four instalments across the year, and missing them adds a penalty even when you pay in full at the end.

Go deeper: the quarterly payment guide, with the vouchers.

The S corp question, but only once it is worth asking

An S corp election can cut the payroll tax half of that bill, but it costs real money to run and it shrinks the QBI deduction. Below the threshold above, it costs more than it saves.

Go deeper: the S corp calculator, with your own salary split.