How to use the 1099 vs W-2 calculator
- 1 Choose your filing status.
- 2 Enter the W-2 salary, the benefits the employer pays and the 401(k) match.
- 3 Enter the 1099 hourly rate and billable hours.
- 4 Enter business expenses and the health insurance you would buy, then compare.
Worked example
A single filer comparing an $80,000 salary with $10,000 of benefits and a $2,400 match against a $55-an-hour contract for 1,800 hours, with $3,000 of expenses and $7,200 of health insurance. The W-2 job leaves $65,110 after tax plus $12,400 of benefits: $77,510. The contract grosses $99,000 but after $13,564 of self-employment tax and $6,314 of income tax leaves $68,922, so the W-2 job is worth about $8,588 more. The contract breaks even at $61.86 an hour.
Pricing contract work
- Count only billable hours when setting a rate.
- Add the cost of benefits you will buy yourself.
- Set aside 25% to 30% of each payment for tax.
- Open a Solo 401(k) or SEP IRA to replace the match.
See self-employment tax with the Self-Employment Tax Calculator, plan payments with the Estimated Tax Calculator, and check W-2 pay with the Paycheck Calculator.
Features
Equal comparison
Federal tax, payroll tax, benefits and expenses on both sides.
Contractor deductions
Half of SE tax, health insurance and the 20% QBI deduction.
Break-even rate
The hourly rate at which contracting pays the same.
When to use it
Weighing a job offer
See W-2 take-home in detail with the Paycheck Calculator.
Going freelance
Plan your tax with the Self-Employment Tax Calculator.
Quarterly payments
Contractors pay tax during the year. See how with the Estimated Tax Calculator.
Converting rates
Turn an hourly rate into a salary with the Hourly to Salary Calculator.
Related Pay and Salary tasks
Frequently asked questions
What is the difference between 1099 and W-2?
A W-2 employee has taxes withheld and usually gets benefits; the employer pays half of Social Security and Medicare. A 1099 contractor is self-employed, gets paid in full, pays self-employment tax and quarterly estimated tax, and has no employer benefits.
How much more should a contractor charge?
Often 25% to 50% more than the equivalent employee hourly rate, to cover self-employment tax, benefits, unpaid time off and business costs. In the example, $55 an hour is not enough; the break-even is about $61.86.
What is self-employment tax?
15.3% on 92.35% of net profit: 12.4% Social Security up to the wage base ($184,500 in 2026) and 2.9% Medicare. Employees pay half of this, 7.65%, and the employer pays the other half.
What is the QBI deduction?
The qualified business income deduction lets many self-employed people deduct up to 20% of their business income, limited to 20% of taxable income. It was made permanent in 2025. Above certain income levels, limits apply to some service businesses.
Can contractors deduct health insurance?
Yes. Self-employed people can usually deduct premiums for themselves and their family, as long as they are not eligible for an employer plan through a spouse.
What benefits should I count for a W-2 job?
Employer-paid health, dental and vision premiums, the 401(k) match, life and disability insurance, and paid time off. Many employers pay $8,000 to $25,000 a year for family health coverage.
Why are billable hours lower than 2,080?
A full-time employee is paid for about 2,080 hours including holidays and vacation. Contractors are paid only for hours they bill and spend time finding work, so 1,500 to 1,800 billable hours is common.
Do contractors pay quarterly taxes?
Yes. With no withholding, contractors usually pay estimated tax by April 15, June 15, September 15 and January 15.
Can an employer call me a contractor to avoid taxes?
Not if you are really an employee. The IRS and Department of Labor look at control over how, when and where you work. Misclassified workers can file Form SS-8 or Form 8919.
Does this include state tax?
No. State income tax applies to both, so it changes the comparison little. Federal tax and payroll taxes make the main difference.
Results are estimates based on the official rates linked above. Confirm important figures with the issuing authority or a qualified adviser before you act on them.
Built and reviewed by Hamza Farooq, founder and lead developer
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