Currently, I make about $96000 a year as a W2 employee in the USA. Suppose I were to make the same amount through working on sites like ODesk.com at home. In other words, I would be an independent contractor instead. I believe the amount of business expenses would be minimal unless I needed to buy licenses for certain types of software. So for now assume that business expenses would basically be $0 although I may probably be eligible for some business deductions. Based on my research so far, it looks like the only differences in taxes would be:

  • I pay about 7% more in total taxes since I now have to pay the other half of the federal payroll taxes.
  • I know this isn't exactly related to taxes, but I now have to worry about finding my own health care and there are no more 401K contributions from an employer.
  • I have to pay the taxes quarterly instead of yearly now.

Does that seem right? Are there other costs that I am not taking into consideration here? The 3 things above seem to be the major things to worry about if I decide to choose this route.

1 Answer 1


Yes, you've summarized it well. You may be able to depreciate your computer, expense some software licenses and may be home office if you qualify, but at this scale of earning - it will probably not cover for the loss of the money you need to pay for the additional SE tax (the employer part of the FICA taxes for W2 employees) and benefits (subsidized health insurance, bonuses you get from your employer, insurances, etc).

Don't forget the additional expense of business licenses, liability insurances etc. While relatively small amounts and deductible - still money out of your pocket.

That said... Good luck earning $96K on ODesk.

  • Haha yeah earning $96K on ODesk.com doesn't seem likely, but I can also find other sources of income outside of that site too (like Craigslist or word of mouth, etc.).
    – Andrew
    Mar 30, 2015 at 1:45

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