About the 1099 vs W-2 Calculator
This 1099 vs W-2 calculator puts a salaried job and an independent-contractor offer on the same footing. A W-2 employee has half of Social Security and Medicare paid by the employer and usually gets health insurance, a 401(k) match and paid time off. A 1099 contractor pays the full 15.3% self-employment tax, buys their own insurance and only earns for the hours they bill — but can deduct business expenses and may claim the 20% qualified business income (QBI) deduction.
Enter the W-2 salary and the value of its benefits, then the contract hourly rate, the hours you realistically expect to bill in a year, and your business expenses. The calculator estimates 2026 federal income tax (IRS Rev. Proc. 2025-32 brackets and the $16,100 / $32,200 / $24,150 standard deductions), FICA or self-employment tax and a flat state rate for both, then shows which option leaves you better off and the 1099 hourly rate you would need to break even.
Use it before accepting a contract role, converting from employee to consultant, or negotiating a W-2-to-1099 rate. It assumes the standard deduction, no other income, and that the contractor’s business is eligible for the full QBI deduction (high earners in specified service fields may be limited).
With the default inputs, the 1099 advantage vs w-2 (per year) is $1,850.82. Change any value above to recalculate instantly.
How to use the 1099 vs w-2 calculator
- 1Enter the W-2 salary and the yearly value of its health insurance, 401(k) match and other benefits.
- 2Enter the 1099 hourly rate and the hours you expect to bill in a year.
- 3Add yearly business expenses such as software, equipment and insurance.
- 4Choose your filing status and state tax rate.
- 5Compare the totals and note the break-even contract rate.
Formula and method
For the W-2 job, the employee pays 7.65% FICA (6.2% Social Security up to $184,500 plus 1.45% Medicare) and federal income tax on salary minus the 2026 standard deduction. Employer-paid health insurance, the 401(k) match and other benefits are added to net pay because a contractor would have to fund them personally.
For the 1099 contract, net profit is billings minus expenses. Self-employment tax is 15.3% of 92.35% of profit (12.4% Social Security up to the wage base, 2.9% Medicare). Half of SE tax and self-paid health premiums are deducted before income tax, and the QBI deduction removes 20% of qualified income (capped at 20% of taxable income). The break-even rate is found by solving for the hourly rate that makes both values equal.
- FICA
- Employee Social Security + Medicare (7.65%)
- SE tax
- Self-employment tax: 15.3% × 92.35% of net profit
- QBI
- Qualified business income deduction (20%)
Worked examples
$100,000 W-2 vs $75/hour for 1,800 hours
The W-2 job nets $74,180 after $25,820 of taxes, plus $11,000 of health and match benefits = $85,180. The contract bills $135,000; after $5,000 expenses, $18,368 SE tax, income taxes and $7,000 insurance it nets $87,031 — about $1,851 ahead. Anything under $73.41/hour would lose.
$80,000 W-2 vs $50/hour, 1,600 hours
At only 1,600 billable hours, $50/hour grosses $80,000 — the same as the salary — but after SE tax, expenses and buying insurance it nets $52,342, about $17,168 less than the W-2 package. The contract would need about $65.50/hour.
Married, $150,000 W-2 vs $110/hour
Billing $203,500 sounds far better than $150,000, but $27,623 of SE tax and $20,000 of expenses and family insurance leave the contract about $1,612 behind. The break-even rate is roughly $111.36/hour.
Frequently asked questions
How much more should a 1099 contractor charge than a W-2 employee?+
A common rule of thumb is 1.25× to 1.5× the W-2 hourly equivalent (salary ÷ 2,080), and more when benefits are generous or billable hours are uncertain. Use the break-even rate above for your own numbers.
What is self-employment tax?+
It is Social Security and Medicare for the self-employed: 15.3% of 92.35% of net earnings (12.4% Social Security up to the $184,500 wage base in 2026 plus 2.9% Medicare). Employees pay only half; employers pay the other half.
What can 1099 contractors deduct?+
Ordinary and necessary business expenses (equipment, software, home office, mileage, professional insurance), half of self-employment tax, self-employed health insurance premiums, retirement contributions such as a SEP-IRA or Solo 401(k), and often the 20% QBI deduction.
Do contractors pay quarterly taxes?+
Usually yes. No tax is withheld from 1099 income, so the IRS expects estimated payments in April, June, September and January if you will owe $1,000 or more for the year.
Why count fewer hours for 1099 work?+
W-2 salaries pay for holidays, vacation and sick days. Contractors earn nothing when they are not billing, and often have gaps between contracts, so 1,500–1,850 billable hours a year is more realistic than 2,080.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.