1099 vs W-2 calculator
Compare a contract rate against a salary with benefits after taxes, and find the break-even rate.
- ๐บ๐ธ US federal & state rules
- 2026 federal and state rules
- See sources
The W-2 job comes out ahead by
$14,082
$73,063 vs $87,145 a year after taxes and benefits
- Break-even contract rate
- $70.13/hr
- W-2 take-home
- $72,145
- 1099 take-home
- $88,063
- Employer FICA you now pay
- $7,451
This is an example. Enter your numbers above and press the button to see your own result.
Side by side
| Gross | $90,000 vs $120,000 |
|---|---|
| Business expenses | 0 vs $5,000 |
| Federal income tax | $10,970 vs $10,688 |
| Social Security and Medicare | $6,885 vs $16,249 |
| Texas tax | $0 vs $0 |
| Benefits | +$15,000 provided vs โ$15,000 bought yourself |
| Net value | $87,145 vs $73,063 |
- Benefits are counted at the dollar value you enter: employer health premiums, 401(k) match, paid time off, disability and life insurance. Typical packages are worth 20% to 30% of salary.
- The contractor side uses the standard deduction, half the self-employment tax and the qualified business income deduction. A solo 401(k) or SEP can shelter far more than an employee plan, which this does not model.
- Employee Social Security and Medicare are 7.65%; the self-employed pay both halves. Unemployment insurance and workers' compensation also stop with a 1099.
Show the math
| W-2: salary minus taxes plus benefits | $90,000 โ $17,855 + $15,000 = $87,145 |
|---|---|
| 1099: revenue minus expenses minus taxes minus benefits | $120,000 โ $5,000 โ $26,937 โ $15,000 = $73,063 |
| Rule of thumb | A contract needs roughly 56% more per hour than the salary equivalent to match |
What to do next
How it works
For the W-2 side, the calculator takes the salary, subtracts federal income tax, Social Security, Medicare and state tax, and adds the value of benefits. For the 1099 side, it takes rate times hours, subtracts expenses and the full set of self-employment and income taxes, and subtracts the cost of buying the same benefits yourself. It then searches for the contract rate that makes the two equal.
Things to keep in mind
Billable hours matter more than the rate. Contractors lose time to finding work, admin and gaps between projects. 1,600 to 1,800 billable hours is a realistic year for many.
The comparison ignores job security, unemployment insurance, workers' compensation and employer-paid disability coverage, all of which only come with W-2 employment.
Sources
Rules applied as of 2026-01-01. See the sources below for details.
- IRS Topic no. 554 (reviewed 24-Sep-2026)Checked 2026-10-19
- IRS Publication 15 (2026), What's New, dated Dec 15, 2025Checked 2026-10-19
- IRS Topic no. 751 (reviewed 24-Sep-2026)Checked 2026-10-19
- SSA, Federal Register 90 FR (2025-19763) 'Cost-of-Living Increase and Other Determinations for 2026' (Nov 3, 2025)Checked 2026-10-19
Frequently asked questions
How much more should a 1099 rate be than a W-2 salary?
Usually 25% to 50% more per hour. The contractor pays the employer's 7.65% share of Social Security and Medicare, buys their own benefits, gets no paid time off and carries the risk of gaps between contracts.
How do I convert a salary to a contract rate?
Divide the salary by your billable hours, then add the benefit value and the extra payroll tax. The break-even rate above does that with your numbers and your state's taxes.
Are taxes higher as a 1099 contractor?
Income tax is the same. Self-employment tax adds the 7.65% an employer would have paid, partly offset by deducting half of it and by business expenses. The real cost is benefits and unpaid time.
Can I write off more as a contractor?
Yes. Home office, equipment, software, mileage, health insurance premiums and larger retirement contributions through a SEP-IRA or solo 401(k) are all available to the self-employed.