Free tool · Tax year 2026
1099 vs W-2 Calculator
Weighing a contract rate against a salary? Compare the real, after-tax value of both offers — including self-employment tax, benefits, and health insurance — and see exactly what hourly rate makes the 1099 offer worth it.
| W-2 | 1099 | |
|---|---|---|
| Gross income | ||
| Business expenses | — | |
| Payroll / SE tax | ||
| Federal income tax | ||
| Health insurance (self-paid) | — | |
| Employer benefits value | — | |
| Effective annual value |
Estimate only. Federal taxes only, using 2026 rates, the standard deduction, and simplified QBI and self-employed health insurance deductions. Not included: state taxes, tax credits, retirement contributions, unemployment insurance, or the value of job security and paid leave. Not tax advice — confirm big decisions with a professional.
How this calculator works
- W-2 side: your salary minus the employee share of Social Security and Medicare (7.65%, per the 2026 wage base) and federal income tax, plus the benefits value you enter.
- 1099 side: contract income minus business expenses, minus 15.3% self-employment tax (Schedule SE), minus federal income tax after the half-SE-tax, health insurance, standard, and QBI deductions — minus the health premiums you actually pay.
- Breakeven: we solve for the contract income where the 1099 offer's net value equals the W-2 offer's take-home plus benefits, and convert it to an hourly rate at your billable hours.
The quick comparison
| W-2 employee | 1099 contractor | |
|---|---|---|
| Social Security & Medicare | 7.65% (employer pays the other half) | 15.3% self-employment tax |
| Health insurance | Usually employer-subsidized | Self-paid (but deductible) |
| Business expenses | Not deductible | Deductible |
| QBI deduction (20%) | No | Usually yes |
| Paid time off / 401k match | Often yes | No |
| Tax withholding | Automatic | You pay quarterly estimates |
Frequently asked questions
How much more should a 1099 rate be than a W-2 salary?
A common rule of thumb is 20–40% more, but the honest answer depends on benefits and expenses. As a contractor you pay both halves of Social Security and Medicare (15.3% self-employment tax instead of the 7.65% employee share), buy your own health insurance, and get no paid time off or 401k match. This calculator replaces the rule of thumb with your actual numbers and computes the exact breakeven rate.
Why do 1099 contractors pay more tax than W-2 employees?
Employees split Social Security and Medicare with their employer — 7.65% each. Contractors pay both halves themselves as self-employment tax. Contractors do get offsetting breaks: they deduct half the SE tax, deduct business expenses, usually qualify for the 20% QBI deduction, and can deduct health insurance premiums.
What benefits should I count in the W-2 offer?
The big ones are the employer-paid share of health insurance premiums (often $6,000–$15,000 per year) and any 401k match. Add the annual value of both into the benefits field. Paid time off is already reflected if you compare against a 1099 offer with realistic billable weeks — most contractors bill 44–48 weeks, not 52.
Does this calculator include the QBI deduction?
Yes — the 1099 side applies the 20% qualified business income deduction in simplified form, which most self-employed people can take. It also applies the self-employed health insurance deduction to premiums you enter.
Can an employer just choose to pay me as a 1099 contractor?
No. Worker classification follows IRS rules about control and independence, not preference. If the company controls what you do and how you do it, you are likely an employee under IRS common-law rules. Misclassification can cost the employer back taxes and penalties.