W-2 vs 1099 Calculator
A 1099 contract needs about $100,150 a year to match this W-2 job after tax and benefits.
How the w-2 vs 1099 calculation works
Compare a W-2 salary with benefits against a 1099 contract after FICA, self-employment tax and income tax, and find the contract pay that breaks even.
Employees pay 7.65% FICA
6.2% Social Security up to the wage base ($184,500 in 2026) plus 1.45% Medicare. The employer pays the other 7.65%.
Contractors pay both halves
Self-employment tax is 15.3% of 92.35% of profit, about 14.1%. Business expenses come off first.
Income tax uses one rate you enter
We apply your expected effective rate to the salary and to contract profit minus half the SE tax. No brackets are computed.
Add the value of benefits to the W-2 side
Health cover, a 401(k) match and paid leave are real pay. $8,000 of benefits has to be earned back on a 1099.
Worked example. An $80,000 salary loses $6,120 to FICA and $12,000 to income tax at 15%, then gains $8,000 in benefits: $69,880. A $95,000 contract with $3,000 of expenses pays $12,999.19 SE tax and $12,825.06 income tax, leaving $66,175.75. The W-2 job is worth $3,704.25 more; the contract would need about $100,150 to match.
W-2 vs 1099 FAQ
How much more should a 1099 contractor charge than a W-2 employee?
It depends on the benefits you give up, your expenses and your tax rate, so run your own numbers. With an $80,000 salary, $8,000 of benefits and $3,000 of expenses at 15%, the break-even is about $100,150, 25% more. With no benefits and no expenses it is about $86,028, 7.5% more, mostly the employer's 7.65% FICA share you now pay yourself.
Is 1099 or W-2 better for taxes?
A W-2 employee pays half the FICA and the employer pays the rest. A contractor pays the full 15.3% but can deduct business expenses and half the SE tax. An employer withholds tax from your pay; a client generally does not withhold from a contractor's pay, so you pay it yourself.
How does the IRS decide if I am a W-2 employee or a 1099 contractor?
Not by the form you are given. Under the IRS common-law rules, what matters is whether the business has the right to direct and control what you do and how you do it. The IRS looks at behavioral control, financial control and the type of relationship. If it is unclear, the business or the worker can file Form SS-8 and the IRS will decide, which can take at least six months.
Does this include the QBI deduction?
No. Self-employed people may be able to deduct up to 20% of qualified business income (QBI); wages earned as an employee are not QBI. Limits apply, so the 1099 result here may be a little low if you qualify. Ask a tax professional.
How do I convert a W-2 salary to a 1099 hourly rate?
Take the break-even contract pay and divide by the hours you'll bill. Using 2,080 hours assumes full-time with no unpaid time off, so divide by fewer hours if you expect gaps.
Does this include state taxes?
Only through the effective rate you enter. It's an estimate and isn't tax advice.
Sources: IRS: Independent contractor or employee? · IRS: Topic 751, Social Security and Medicare withholding rates · IRS: Self-employment tax · SSA: Contribution and benefit base · IRS: Publication 15 (2026), Employer's Tax Guide · IRS: Qualified business income deduction