Let’s compare two therapists on a 60/40 split (therapist keeps 60%). Each one just got a $6,000 paycheck for the month. We’ll look at a W-2 employee vs a 1099 contractor.
W-2 therapist
Effective monthly value: about $5,941
1099 therapist
Effective monthly value: about $4,882
Even with no PTO, the W-2 therapist in this example is still walking away with roughly a thousand dollars more value per month on the exact same revenue and the exact same 60/40 split.
Assumptions so it’s apples to apples:
– Both therapists”gross pay” (before taxes) is $6,000 for the month.
– The W-2 therapist does not get PTO.
– The clinic covers normal clinician costs for the W-2 (malpractice, EMR, etc.) and contributes to health insurance.
– The 1099 pays their own costs and buys their own coverage.
– We’re only looking at realistic monthly math, not annual deductions.
Step 1. Taxes on that $6,000
W-2 employee
As a W-2 employee, you pay employee payroll tax (Social Security + Medicare), which is about 7.65%.
7.65% of $6,000 = $459
$6,000 - $459 = $5,541 take-home before income tax.
The clinic pays the other half of that tax for you, which you never see come out of your check.
1099 contractor
As a 1099 contractor, you pay self-employment tax, which is both halves of Social Security + Medicare, about 15.3%.
15.3% of $6,000 = $918
$6,000 - $918 = $5,082 before you’ve paid income tax.
So just at the tax level:
– W-2 in pocket so far: $5,541
– 1099 in pocket so far: $5,082
Difference at this point: W-2 is already about $459 ahead on the exact same $6,000 “split.”
Step 2. Costs of doing the job
The 1099 has to pay for their own:
– malpractice insurance
– EMR / telehealth platform
– CE/supervision support
– other basic clinical overhead
It’s very normal for that to land around $200/month at minimum.
So for the 1099:
$5,082 - $200 = $4,882 effective
For the W-2:
Those costs are covered by the clinic. You don’t pay them out of your check.
So the W-2 therapist is still at $5,541.
Step 3. Health insurance help
Most legit W-2 clinics kick in toward health insurance. A common employer contribution is roughly $300–$400/month. We’ll call it $400 of value.
W-2 effective total, including covered benefits:
$5,541 + $400 = $5,941
1099 effective total (no employer help on insurance):
$4,882
Final comparison, same 60% split, same $6,000 gross “paycheck,” no PTO for the W-2:
– W-2 therapist
Effective monthly value: about $5,941
– 1099 therapist
Effective monthly value: about $4,882
Gap: about $1,059 more value to the W-2.
Why this matters in plain language
When a therapist says “1099 pays more,” they’re looking at the top number ($6,000) and ignoring what they lose after that:
– Extra tax they owe as self-employed
– Buying their own malpractice, CE, EMR access
– Paying for their own health insurance at full cost
– Having zero built-in protection if something goes sideways clinically
Even with no PTO, the W-2 therapist in this example is still walking away with roughly a thousand dollars more value per month on the exact same revenue and the exact same 60/40 split.