Comparing a W2 job to a 1099. Looking for advice

[Berkely10]

Currently looking at 2 jobs one in Oregon (w2) and one in Nevada (1099). Beyond the obvious benefit of not paying state income tax, I'm having difficulty figuring out a great way to compare them financially.

It seems that with a 1099 there are some ways to save on taxes as a business owner? While a W2 has advantages due to benefits?

Any resources of advice would be helpful thanks!

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[RangerBob]

Whitecoatinvestor has some good articles on this.

You should make at least $20k more with 1099 position, if not even more, considering you have to buy all your own benefits as a 1099 contractor. I pay almost $20k/year just for health insurance for my family. True I can put away over $60k into a solo 401k, but if you have cheap good quality health insurance and a matching 401k those could be worth much more. I also have to pay the employer portion of Social Security/Medicare.

Check out the whitecoatinvestor blog posts. Great info on this topic, and countless others. Wish I knew about it as a premed

 

[SigmaFS]

I wouldn't necessarily add a dollar value, but a %. For example, a 1099 IC is responsible for the both the employer and employee portion of Social Security (6.2% x 2) and Medicare (1.45% x 2) tax. Or, an additional 7.65% the employer would pay as W2 employee. As a W2 employee, you must evaluate your benefits package; health insurance, 401k including any employer match, paid time off (PTO), any employer paid malpractice ins, licenses, association dues.

As a 1099 IC you're considered a business, therefore you can deduct business expenses; associate dues, professional licenses, continuing education, malpractice insurance, health insurance premiums, dental equipment, lab fees if you pay for them, conference fees, business travel and a few others. And as mentioned, you can contribute to a solo/individual 401k with contribution limit (~$62K of 2023) and also to a Health Savings Account (HSA) of up to ~$3,750 for single if you have a qualified high deductible health insurance plan. Contribution for 401k and an HSA lower your taxable income.

Ballparking, I would expect the 1099 IC compensation to be about 10% to 15% greater than the W2 position. Good luck!

 

[sirspamalot]

If yaint a 1099, you're doing it wrong. Add 20% to your best W2 salary offer and you will come out 35% ahead... assuming you play the S Corp game correctly.

 

[The White Coat Investor]

There are benefits both ways. As a general rule, an equivalent offer for an emergency doc needs to be about 10% higher if you're an independent contractor (1099) instead of an employee. The main benefits of employment are the employer paying half of the payroll taxes and some of the benefits (80% of health insurance premiums and a 401k match are typical.) The main benefits of self-employment are that you can choose your own benefits package, may be able to write off a few expenses more easily, and can consider forming an S Corp to save on Medicare tax.