1099 vs W-2 Calculator: Which Offer Actually Pays More?

Neither is automatically better, it depends on the numbers. A W-2 employee gets employer-paid benefits, a 401(k) match, unemployment coverage, and the employer pays half of Social Security and Medicare. A 1099 contractor pays both halves (15.3% self-employment tax on most net earnings), buys their own benefits, and absorbs unpaid time off, but gets business deductions, the QBI deduction, and often much higher retirement contribution limits. As a rule of thumb, a 1099 rate needs to run roughly 30-50% above the equivalent W-2 salary before the contractor comes out ahead. Run your actual numbers in the calculator above rather than guessing.

Most contractors should charge 1.3x to 1.5x the equivalent W-2 salary to break even. The gap covers three things: the employer half of payroll taxes you now pay yourself (7.65%), the benefits you now buy on your own dime (health insurance alone often runs $8,000+ per year), and the weeks you won't bill, vacation, holidays, sick days, and gaps between contracts. If the W-2 offer is $120,000, a 1099 rate below roughly $156,000 gross usually means you're taking a pay cut without realizing it. The calculator above computes your exact break-even rate from your own inputs.

1099 contractors pay self-employment tax plus ordinary income tax. Self-employment tax is 15.3% (12.4% Social Security plus 2.9% Medicare) applied to 92.35% of your net self-employment earnings, the Social Security portion stops at the annual wage base ($184,500 in 2026), while the Medicare portion has no cap. You deduct half of the SE tax when computing your income tax, and you'll generally owe quarterly estimated payments since nothing is withheld. Many contractors also qualify for the 20% qualified business income (QBI) deduction, which trims income tax but not SE tax.

Generally no. Unreimbursed employee expenses are not deductible on your federal return under current law, a W-2 employee who buys their own laptop, home office setup, or professional dues gets no federal deduction for any of it. A 1099 contractor deducts the same costs directly against business income on Schedule C, cutting both income tax and self-employment tax. This asymmetry is one of the genuine advantages of contractor status, and it's why the expense input in the calculator matters: every dollar of legitimate business expense reduces the rate you need to break even.

On the same gross pay, usually yes, but the gap is smaller than the headline 15.3% suggests. A W-2 employee pays 7.65% in FICA and the employer pays the other 7.65% invisibly. A contractor pays both halves, but the tax applies to only 92.35% of net earnings, half the SE tax is deductible against income tax, and the 20% QBI deduction can shelter a meaningful slice of profit from income tax. After those offsets, the true extra tax burden of 1099 work is typically closer to 6-8 percentage points than 15.3, which is exactly why the break-even rate is 1.3-1.5x rather than 2x.

Yes. The Social Security portion. 6.2% for employees, 12.4% for the self-employed, applies only up to the annual wage base, which is $184,500 for 2026. Above that, only Medicare continues (1.45% for employees, 2.9% for the self-employed, with an additional 0.9% Medicare surtax at higher income levels). This matters for high earners comparing offers: once you're past the wage base, the self-employment tax penalty on additional 1099 income shrinks substantially, which lowers the multiple you need to charge.

Once net 1099 income consistently clears roughly $75,000-$100,000 per year, an S-corp election starts to pay for itself. The S-corp lets you split income into a reasonable salary (subject to payroll tax) and distributions (not subject to self-employment tax), which can save five figures annually at higher income levels, after accounting for payroll service costs, a separate business tax return, and state fees. If your contract income is heading that direction, run the numbers in our S-corp calculator before year-end so you don't leave a full year of savings on the table.