Self-employment tax is the first gap
W-2 employees split FICA with their employer. Contractors pay 12.4% Social Security and 2.9% Medicare on 92.35% of net profit, plus 0.9% Additional Medicare above the usual thresholds. Half of the 12.4% + 2.9% is deductible when computing income tax.
QBI can close part of the gap
Section 199A lets many sole proprietors deduct 20% of qualified business income, subject to taxable-income limits and specified-service rules at higher incomes. Kept applies a simplified QBI estimate. Specified service trades (consulting, law, health) start losing QBI above the 2026 phaseout — confirm with a preparer before you price a contract as if QBI were guaranteed.
Benefits are the rest of the story
Health insurance, employer 401(k) match, unemployment insurance, and paid leave do not appear on a 1099. A 25–35% rate premium over the equivalent salary is a common rule of thumb after tax and benefits. Use the W-2 vs 1099 calculator to price the tax piece, then add benefits on top.