1099 vs W-2 Calculator

How This 1099 vs W-2 Calculator Works

The calculator runs both sides on the same hours-per-year basis, so the comparison nets out cleanly. The W-2 side starts from gross salary. It subtracts federal income tax, the 7.65 percent employee FICA share, and state income tax, then adds the dollar value of employer-paid benefits (health, 401(k) match, PTO, and any extras).

The 1099 side starts from gross contractor income. First, it subtracts ordinary business expenses. Then it applies self-employment tax to 92.35 percent of net earnings, using the 2026 Social Security wage base of $184,500. Federal income tax is computed with the half-SE-tax above-the-line deduction. State tax applies to the AGI after that deduction. Self-paid health insurance and retirement contributions come off the bottom line. The break-even insight uses a bisection search to find the 1099 gross income that matches total W-2 value to within a dollar.

The Hidden Costs of Going 1099

The 7.65 percent FICA share your W-2 employer pays does not disappear when you go independent. It moves onto your return as self-employment tax: 12.4 percent Social Security plus 2.9 percent Medicare, totaling 15.3 percent on 92.35 percent of net earnings. Half of that is deductible above the line, which softens the federal income tax hit. The cash still leaves your account though.

Then come the checks your employer used to write. Health insurance is often $6,000 to $20,000 per year on the individual market. Retirement match is commonly 3 to 6 percent of salary. Paid time off is worth 10 to 25 days of pay at the W-2 daily rate. Unemployment insurance and workers' comp are usually bought by 1099 contractors themselves, or just absorbed. Add it up. A 1099 rate that looks 25 percent higher than the W-2 hourly rate often nets out roughly even.

Common Mistakes When Comparing 1099 vs W-2 Pay

The most common error is comparing gross to gross without backing out benefits. A $100,000 W-2 with $25,000 in benefits is not the same as $100,000 of 1099 income. The second mistake is forgetting the Social Security wage base cap at $184,500 (2026). Above that line, the 12.4 percent SS portion of SE tax stops, which materially helps high earners. Third, many 1099 estimates ignore the half-SE-tax above-the-line deduction, which is worth several hundred to a few thousand dollars depending on bracket.

Finally, contractors often price work at 2,080 hours per year when realistic utilization sits between 1,600 and 1,800. Drop the lower number into your hours-per-year input if you bill clients rather than getting paid for every clocked hour.

When 1099 Actually Wins

1099 tends to come out ahead when the rate differential is large (think 50 percent or more above the W-2 hourly equivalent). It also wins when deductible business expenses are real, like home office, equipment, mileage, and software. Skipping employer health insurance helps too, whether through spouse coverage, an ACA subsidy, or veteran benefits. Add a Solo 401(k) or SEP-IRA to defer significant tax and the picture tilts further. W-2 tends to win when benefits are rich, the rate differential is modest, or income variance and lack of unemployment protection would create real financial stress.

For more comparisons, run the numbers through our salary vs hourly calculator, model bonuses with the overtime tax savings calculator, or check what a job exit looks like with the final paycheck calculator.

Estimates only. Not tax or legal advice. Consult a CPA for your situation. Federal brackets, the SS wage base, and state tax rates change every year. Your actual liability depends on credits, deductions, and other income not modeled here.