1099 vs W-2 calculator
Put a salary offer next to a contract rate and see what each is actually worth after tax, benefits, paid time off and business expenses — plus the hourly rate a contract would need to match the job.
The W-2 offer
The 1099 offer
1099 comes out ahead by
$13,675
To match the W-2 package you need about $63/hr at 1,800 billable hours.
W-2 employee
- Salary
- $85,000
- Your half of FICA
- − $6,503
- Federal income tax
- − $18,700
- Benefits value
- + $9,000
- Paid time off value
- $4,904
- Total value
- $68,798
1099 contractor
- Gross billings
- $135,000
- Business expenses
- − $6,000
- Self-employment tax (15.3%)
- − $18,227
- Federal income tax (after QBI)
- − $21,100
- Own health insurance
- − $7,200
- Take-home
- $82,473
Why the sticker numbers mislead
A $85,000 salary and an $85,000 year of contracting are not the same money. The employee's Social Security and Medicare bill is split with the employer; the contractor pays all 15.3%. The employee's health premium is largely paid by someone else; the contractor buys it retail.
The other half of the gap is time. Salary keeps paying through holidays, sick days, slow weeks and the gap between projects. A contract rate only pays for hours billed, which is why the honest comparison uses realistic billable hours — 1,600 to 1,900 for most people — rather than a full 2,080.
Contractors get real advantages back: deductible business expenses, the 20% qualified business income deduction, and retirement accounts with far higher limits than a workplace 401(k). Those are worth a lot, but they are earned by tracking things carefully, not automatically.
Frequently asked questions
What hourly rate equals my W-2 salary as a 1099 contractor?
A common shortcut is salary divided by 2,080 hours, then multiplied by 1.25 to 1.4 — covering the employer half of FICA, health insurance, unpaid time off and business expenses. This calculator does it precisely from your own numbers instead.
Do 1099 contractors pay more tax than W-2 employees?
On payroll tax, yes: contractors pay the full 15.3% instead of 7.65%, because there is no employer paying the other half. Contractors offset some of that with business expense deductions and the 20% QBI deduction, which W-2 employees cannot claim.
What am I giving up by going 1099?
Employer-paid health premiums, 401(k) match, paid time off, unemployment insurance, workers' compensation and pay continuity between contracts. Those have real dollar value, which is why the comparison above adds benefits and PTO to the W-2 side.
Is 1099 or W-2 better?
Financially it depends entirely on the rate and how many hours you can actually bill. A 1099 role at the same nominal pay is a pay cut; at 30-40% more it is usually a raise. Non-financially, 1099 buys control and carries the income risk yourself.
Estimates only, using projected 2026 federal figures. Not tax advice.