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I've done contract work on and off so I've dealt with this issues as both a W2 and SE contractor. Have you looked into the substantial tax deductions you MAY receive as a SE employee?

A good deal of the SE Fica taxes could be offset by the extra tax deductions you can take as a SE employee. $45-$52 an hour is substantial, adding your income as DINKS puts you both in the upper middle class tax brackets. If you can deduct home office, computer hardware/software, internet connection fee, travel expenses, car depreciation etc. it could significantly effect your decision.

As already mentioned, the tax deduction advantages of a SE are usually greater than a W2 employee and can give you even a greater benefit. TMFPIXY has some good posts about this but I believe a SEP IRA is usually the best option to shield a great deal of SE employment income from taxes. If you and your husband are ones to save/invest a large portion of your income, then I would lean toward option II.

Another point not mentioned is whether or not he can change back and forth from option I and II. If you find out the one or the other is not working out due to new info, can and when can you switch over?

regards,

decath
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