A $75 hourly contract and a $120,000 salary need an annual comparison. Start with the work you expect to be paid for, then account for the costs each offer leaves you to pay.
A comparison you can check
This hypothetical example compares gross earnings and cash costs only. It does not estimate tax or establish that either offer pays more after tax.
| Annual item | W-2 offer | 1099 offer |
|---|---|---|
| Salary or receipts | $120,000 | $144,000 |
| Paid work assumption | Annual salary | $75 × 40 hours × 48 weeks |
| Health premiums paid by you | $3,600 | $8,400 |
| Malpractice paid by you | $0 | $2,500 |
| Other business cash costs | $0 | $5,000 |
| Cash before taxes and retirement | $116,400 | $128,100 |
| Your planned retirement contribution | $4,800 | $15,000 |
| Cash before taxes, after your contribution | $111,600 | $113,100 |
| Employer retirement contribution | $4,800 | $0 |
The contractor has $1,500 more cash before taxes under these assumptions, while making a larger retirement contribution. The W-2 employer contributes another $4,800 to retirement. Neither retirement balance belongs in spendable take-home pay. The 1099 calculation already allows four unpaid weeks; do not subtract the same time off again as a cash expense.
Replace every assumption with your offer and insurance quotes. Add cancellation risk, uncompensated administrative work, travel, and any required supervision or collaboration costs. Then ask your tax preparer to calculate both household returns using the same filing status, tax year, other income, and credits.
Calculate employment taxes correctly
For a sole proprietor, self-employment tax generally starts with 92.35% of business profit. The Social Security portion is 12.4%, limited by the $184,500 2026 wage base after the same person's Social Security wages. Medicare is 2.9% without that cap. This is not 15.3% of all gross receipts. IRS self-employment rules, SSA 2026 wage base.
A separate 0.9% Additional Medicare tax can apply to combined Medicare wages and self-employment earnings above $200,000 for single filers, $250,000 for joint filers, or $125,000 for married filing separately. IRS Additional Medicare tax.
Income tax also depends on deductions and credits. Healthcare services generally fall under the specified service trade or business rules for QBI. For 2026 joint filers, the relevant taxable-income range before QBI is $403,500–$553,500; above the upper end, that healthcare income is ineligible. QBI is not a flat 20% deduction from gross revenue. IRS QBI instructions, 2026 thresholds.
Compare retirement plans on the same basis
In 2026, the employee deferral limit is $24,500 and the overall defined contribution limit is $72,000, before catch-up contributions and subject to compensation limits. Eligible age-50+ catch-up is $8,000; ages 60–63 may use $11,250 instead. These are not guaranteed contribution amounts, and employer-sponsored plans can have the same overall ceiling. IRS retirement limits.
A sole proprietor's employer contribution calculation uses adjusted self-employment earnings; a stated 25% plan rate generally becomes 20% after the required adjustment. An S-corporation bases employer contributions on eligible W-2 compensation, not distributions. Employee deferrals across your employer plan and Solo 401(k) generally share one limit. IRS one-participant plans.
Before you sign
Confirm scope of practice, entity requirements, and telehealth permissions with the relevant boards and a healthcare attorney. An LLC is not a substitute for malpractice coverage. For an S-corporation comparison, include defensible compensation and all payroll and filing costs; do not assume a fixed savings percentage.
Use the income preview to explore a federal estimate, then review benefits, state and local taxes, and your full circumstances with your adviser. The Transition Kit provides a checklist for the remaining setup work.