Paycheck Variation Simulator

The number on a job offer is just the starting point. How you’re paid—salaried, hourly, or as a contractor—dramatically changes your actual take-home pay after taxes. This simulator lets you compare different employment structures side-by-side to see how taxes and deductions will affect your paycheck.

How to Use the Calculator

1. Click the tab that matches the job type: Salaried, Hourly, Contractor, or Tipped.
2. Fill in the details of the job offer, like your pay rate, hours, and state.
3. Click “Calculate” to see a breakdown of your estimated paycheck, from gross pay to net (take-home) pay.
4. For the Contractor option, use the “Compare to W-2 Employee” button to see how that income stacks up against a traditional job after taxes.

Key Financial Terms

• W-2 Employee: An individual who works for an employer on a permanent or regular basis. The employer is responsible for withholding income tax and the employee’s share of FICA taxes from each paycheck. They receive a W-2 form summarizing their annual earnings and withholdings.
• 1099 Independent Contractor: A self-employed individual who provides services to a business. Contractors are not employees, so taxes are not withheld from their pay. They are responsible for paying their own income and self-employment taxes, and they receive a 1099 form detailing their earnings.
• Gross Pay: The total amount of money earned before any deductions. For salaried employees, it’s a portion of their annual salary. For hourly employees, it’s their hourly rate multiplied by the hours worked.
• Net Pay: The amount of money an employee receives after all deductions are taken from their gross pay. This is often referred to as “take-home pay.”
• FICA Tax: The Federal Insurance Contributions Act tax is a U.S. payroll tax composed of Social Security (6.2%) and Medicare (1.45%) taxes. For W-2 employees, this 7.65% is deducted from their pay, and their employer pays a matching 7.65%. Please reference the irs.gov site for up-to-date information.
• Self-Employment Tax: The tax paid by independent contractors to cover Social Security and Medicare. The rate is 15.3%—double the FICA rate—because the contractor must pay both the employee and employer portions. Please reference the irs.gov site for up-to-date information.
• Overtime Pay: Additional pay for hours worked beyond the standard 40-hour workweek. Under federal law, it must be paid at a rate of at least 1.5 times the employee’s regular hourly wage.

Paycheck Simulator Scenario

Use the Paycheck Variation Simulator to establish a baseline. This will be your starting point for the quiz questions that follow.

Baseline Scenario: Salaried Employee

• Select the “Salaried (W-2)” tab.
• Annual Gross Salary: $65,000
• Pay Frequency: Bi-weekly
• Location (State): California (CA)

Click “Calculate” and use the results to answer the questions.