Caleb Porzio

Making $100k As An Employee Versus Being Self-Employed

Jan 2021

I’ve been self-employed for 2 years now. I love it and want to encourage others to go for it, but first, I need to answer a question as fully and completely as I possibly can:

Is it worth it?

If you make $100k as an employee, how much do you need to make as a freelancer? And given all the trade-offs, is it worth it?

At first, the question appears simple, but after accounting for everything like health insurance, benefits, different tax rates and deductions, it becomes very not simple.

I’ve endeavored to answer the question as simply and completely as I possibly can.

TL;DR; A freelancer would have to make $140k (charge $70/hr) to take home the same amount as an employee with a $100k salary.

There’s so much more to it though. Let’s dig in.

Is $100k salary the same as $100k freelancing?

Heads up: I recreated a subset of the US tax system in a spreadsheet to do all of the calculations in this post: Tax Spreadsheet

Also, all these calculations assume you are filing as a single person (not married). The numbers would be different for a married couple, but the ratios and points all still the same.

All other factors aside, let’s look at how much you owe in taxes in these two scenarios:

Total Income: $100,000
Federal Tax: -$15,104
Social Security/Medicare: -$7,650

Take Home: $77,246

Self Employed
Total Income: $100,000
Federal Tax: -$9,964
Self Employment Tax: -$14,130

Take Home: $75,906

These numbers were initially surprising to me. All other factors aside, the difference in take home pay between making $100k as a freelancer vs. an employee isn’t that big of a difference: $1,340

But of course, there’s more to this story.

What about employee benefits and perks?

When you’re a full-time employee, it usually means you get extra employment benefits like health-care. When you’re a freelancer, you have to pay all of this out of pocket yourself.

Assigning a dollar value to employee benefits is difficult because every company is different. The best I can do is reference my own experience as an employee and the experience of friends around me. Here are benefits and perks I consider standard (and their respective values).

Total Benefits Value: $20k

Now, let’s take a look at the adjusted “take home” value as an employee with benefits, vs. a freelancer:

Total Income: $120,000
Federal Tax: -$14,292
SS/Med: -$7,650

Take Home: $98,058

Self Employed
Total Income: $100,000
Federal Tax: -$8,028
SE Tax: -$14,130
Insurance: -$7.5k

Take Home: $70,342

Wow, ok. Now things are looking much different. Being an employee in this scenario is worth $27,716 more than being a freelancer so far.

Again, there’s more to the story still.

Don’t freelancers charge more?

Consider the following situation:

You work for a software development agency. They bill their clients at $125/hr. If you do full-time work for a client of theirs for an entire year (50 weeks or 2000 hours), they’ve grossed $250,000 from your labor. They only have to pay you $120,000 per year, so they’ve now absorbed $130,000 of the value of your labor for a year.

Now, there’s lots of other factors to consider: The employer is absorbing the risk of not having billable client work for an amount of time. They’re also doing the work of finding and retaining the clients, as well as providing other services like project management, employee training, etc…

All EXTREMELY valuable things. The point I want to make however, is that charging as an employee and charging as a freelancer are two very different things. Freelancers can, and are expected to charge more for their labor.

Remember, last we checked, at a $100k salary, plus an extra $20k in benefits, the take home pay for an employee was: $98,058.

You would need to make $140k to take home $98k for the year as a freelancer. Here are the numbers:

Self Employed
Total Income: $139,871
Federal Tax: $14,550
SE Tax: $19,763
Insurance: $7.5k

Take Home: $98,058

Now both the self-employed and salaried take home pays are aligned. However, the self-employed income you need to generate has risen to $140k.

Assuming as a freelancer, you will work 50 weeks (2000 hrs), you would need to charge: $70/hr

This is an extremely reasonable rate to charge as a freelancer (who’s value to an employer is $100k/yr).

In reality a person making a $100k salary, would likely charge more than $70/hr as a freelancer.

My baseless estimate would be $75/hr at minimum and $125/hr at the maximum.

At $90/hr for 50 weeks, a freelancer would gross $180k for the year, and take home $128,560. That’s a ~$30k pay raise from being a $100k employee. Not bad.

So who’s the winner?

Well, you’ve seen by now, there is no clear winner. So much of it depends on how much risk you’re willing to absorb and how big your network is. You can trade both of those for benefits on either side.

However, this post has a bias towards self-employment, so lets more fully explore those benefits.

Perks of being self-employed

I’ve just completed my second year of full-time self-employment and have found some extremely tangible perks over my employment days. Here they are in descending order of concreteness.

Disclaimer: I’m leaving out the giant drawback of having to find the client work yourself, keep yourself utilized, manage the projects and time yourself, etc… This is the main thing that turns people away, and understandably so.

Higher 401(k) Limits

As an employee, the MOST you can contribute to your 401(k) is $19k + any amount your employer matches. Let’s say the match is $6k at the very most.

Employee 401(k) limit: $25k

When you are self employed, you can open a “Solo 401(k)” and make contributions as both the employee AND the employer. You can match yourself!

Self Employed 401(k) limit: $57k

As a financial independence enthusiast, this is maybe the most under-rated perk to me. It means, as a married couple, my wife and I can invest (and reduce our taxable income) by $114k per year as opposed to $50k.

Worth noting: there are other limits based on your total income, and in general most people can’t contribute this insane of an amount, but it’s valuable to know.

Tax Deductions

As a self-employed person, you can deduct your expenses for your business and reduce your taxable income (therefore increasing your take home pay).

On top of obvious things like your laptop and desk purchase, you can deduct other things you were likely paying for BEFORE you were self-employed:


When you work for someone else, you have to use their 401(k) plan (which sometimes offers only bad investments). You also have to go with their health-insurance.

When you’re self-employed, YOU get to make the calls. You can choose great 401(k) plans like Vanguard's Individual 401(k).

Also, you can opt-out of normal expensive health-insurance and go for cheaper options like Sedera, a health-sharing option that can easily cut your costs in half. (Further reading on this)

Business Credit Cards

Now you can finally get those fancy cards with the juicy sign-up bonuses (~$2k in travel rewards) like the Chase Ink Business card.

You might also have big business expenses that you can now funnel through these cards and travel anywhere like a king.


The perk above all other perks for me, that has truly changed my life in radical ways, is FREEDOM.

As a self-employed person, I am now in charge of my own fate. For my personality type, this is an extremely natural fit. Going from being an employee to working for myself has never stopped feeling like a giant weight lifted. It’s a total gift to me.

Want to take a vacation? Make it happen. No worrying about eating into a set amount of days, just make sure it works with your business.

Want to work late? Go for it. Want to skip work today? Go for it.

Want to go fishing on a weekday because everyone else has to work and all the good spots are wide open? Go for it.

Want to try something new with your business? Something dangerous? Something that might potentially change your life? Or even the world? Go for it. (Ok, calm down Caleb)

I could go on and on about this one, but you get the point. The freedom of self-employment is a treasure trove and should not be ignored when weighing the options.

Some questions you might have

How did you come up with these numbers?

I took the US tax forms (1040, etc…), mapped them into a spreadsheet as identically as I could, and ran calculations. You can find my spreadsheet to see for yourself here: Tax Machine 2020 - Google Sheets

What qualifies you to say these things?

Nothing. I have no formal background in finances, taxes, accounting, whatever. I just like to geek out on money stuff.

What about other self-employment deductions like the Qualified Business Income Deduction, the Health-Insurance Deduction, etc..

That’s already all been figured in. I mapped all of that out in the spreadsheet and tried hard to provide actual comprehensive numbers.

How Do I Learn More About All This Stuff

Honestly the best thing you can possibly do for yourself is doing your own taxes as an experiment. I’m DEFINITELY not recommending you actually file these taxes (I still use TurboTax), but crack open the 1040 form (It’s 2 simple pages) and start learning:

If you don’t want to roll up your sleeves though, Mr. Money Mustache is the best financial resource on the internet:

Oh, and The Simple Path To Wealth is the best (and simplest lol) book on finances ever (must read):

Signing Off

So there you go. If you are employed and thinking about going out on your own but are worried about the financial implications, hopefully this post sheds some light on the reality of things.

Hit me up on Twitter (in public tweets, not DMs) if you have thoughts:

Peace, Caleb

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