> ## Documentation Index
> Fetch the complete documentation index at: https://docs.taxhomebase.com/llms.txt
> Use this file to discover all available pages before exploring further.

# W-2 vs. 1099

> How your employment classification affects taxes, deductions, and take-home pay.

<Snippet file="tax-disclaimer.mdx" />

Your employment classification — W-2 employee or 1099 independent contractor — fundamentally changes how your taxes work. Most travel nurses are W-2, but some agencies use 1099 arrangements. TaxHomeBase handles both.

## Side-by-Side Comparison

|                        | W-2 Employee                                           | 1099 Contractor                                   |
| ---------------------- | ------------------------------------------------------ | ------------------------------------------------- |
| **Tax withholding**    | Agency withholds federal/state income tax + FICA       | You pay all taxes yourself                        |
| **FICA taxes**         | 7.65% (employer pays matching 7.65%)                   | 15.3% self-employment tax (you pay both halves)   |
| **Federal deductions** | Standard deduction only (TCJA suspension is permanent) | Schedule C business expenses + standard deduction |
| **State deductions**   | 5 states still allow (NY, CA, AL, HI, AR)              | Full deductions in all states                     |
| **Quarterly payments** | Usually not needed (withheld by employer)              | Required — penalties for underpayment             |
| **Tax forms**          | W-2 from each agency                                   | 1099-NEC from each agency                         |

## How Deductions Work

<Tabs>
  <Tab title="W-2 Employees">
    ### Federal Deductions

    The Tax Cuts and Jobs Act (TCJA) of 2017 suspended the ability for W-2 employees to deduct unreimbursed business expenses on their federal return. The One Big Beautiful Bill Act (2025) made this suspension permanent. W-2 employees are limited to the **standard deduction** on their federal return.

    TaxHomeBase still tracks your expenses because:

    * **5 states allow them** — NY, CA, AL, HI, and AR didn't conform to TCJA and still allow W-2 expense deductions on state returns
    * **Profitability tracking** — Expenses are factored into per-assignment net profit

    ### State-Level Deductions

    If you work in a non-conforming state, TaxHomeBase automatically calculates your state deduction:

    | State | Floor  | Rule                                      |
    | ----- | ------ | ----------------------------------------- |
    | NY    | 2% AGI | Deduct amount exceeding 2% of federal AGI |
    | CA    | None   | Deductible from the first dollar          |
    | AL    | 2% AGI | Same as NY                                |
    | HI    | 2% AGI | Same as NY                                |
    | AR    | 2% AGI | Same as NY                                |

    Non-resident apportionment applies: the deduction is proportional to your income earned in that state.
  </Tab>

  <Tab title="1099 Contractors">
    ### Schedule C Deductions

    Business expenses reduce your Schedule C income **before** self-employment tax is calculated. This is a double benefit — lower income tax **and** lower SE tax.

    Deductible expenses include all 13 TaxHomeBase categories: travel, licensing, supplies, CE credits, meals, lodging, uniforms, insurance, dues, parking, phone/internet, tax prep, and other.

    ### Deduction Order

    1. Gross income from contracts
    2. Minus Schedule C business expenses (mileage + expenses + tax home costs)
    3. \= Net self-employment income (SE tax calculated on this)
    4. Minus 50% of SE tax deduction
    5. \= Adjusted Gross Income (AGI)
    6. Minus standard deduction
    7. \= Taxable income (federal income tax calculated on this)
  </Tab>
</Tabs>

## Self-Employment Tax (1099 Only)

1099 contractors pay self-employment tax (the combined employer + employee portions of Social Security and Medicare):

| Component        | Rate      | Wage Base (2025) |
| ---------------- | --------- | ---------------- |
| Social Security  | 12.4%     | \$176,100        |
| Medicare         | 2.9%      | No limit         |
| **Total SE Tax** | **15.3%** |                  |

The tax is calculated on 92.35% of net self-employment income (the 7.65% adjustment mirrors the employer's FICA contribution).

## Filing Status

Your filing status affects your standard deduction amount:

| Status                    | 2025 Standard Deduction |
| ------------------------- | ----------------------- |
| Single                    | \$15,000                |
| Married Filing Jointly    | \$30,000                |
| Married Filing Separately | \$15,000                |
| Head of Household         | \$22,500                |

Set your filing status in **Profile** → **Personal Info**.

## TCJA Suspension (Permanent)

The One Big Beautiful Bill Act, signed July 4, 2025, made the TCJA suspension of W-2 expense deductions permanent. W-2 employees cannot deduct unreimbursed business expenses on their federal return. The standard deduction is applied automatically. However, 5 states (NY, CA, AL, HI, AR) still allow these deductions on state returns — TaxHomeBase tracks and applies these state-level savings automatically.