1099 vs W-2 Calculator

Why a higher 1099 rate can still pay less

An employee pays 7.65% in Social Security and Medicare and the employer pays the other 7.65%. A contractor pays both halves, 15.3% on 92.35% of profit, and also loses employer benefits: health insurance, a retirement match, paid time off and unemployment insurance. This calculator compares the take-home of both, then finds the 1099 income that would leave you equally well off.

What is included

• W-2: federal income tax after the standard deduction, employee Social Security and Medicare, and your flat state rate.
• 1099: self-employment tax, federal income tax with the QBI deduction where it applies, and your flat state rate.
• Benefits: the value you enter is added to the W-2 side, so the comparison is fair.

What is not included

Unpaid time between contracts, the cost of finding clients, health insurance premiums you would buy yourself (add them to expenses), and retirement contributions. Misclassification rules also matter: whether you are a contractor or employee depends on how the work is controlled, not on what a contract says.

For a full estimate of contractor taxes, use the self-employed tax calculator.

Frequently asked questions

Is 1099 or W-2 better?

Neither is better in general. A contractor needs a higher gross rate to match an employee’s take-home once self-employment tax and lost benefits are counted. The break-even figure above shows how much higher.

How much more should a contractor charge than an employee earns?

Often meaningfully more, for the reasons above. The result shows the multiple for your numbers.

Do contractors pay both sides of Social Security?

Yes. Self-employment tax is 15.3% on 92.35% of net profit, which covers the employer and employee shares. Half is deductible for income tax.

Does this include state tax?

Only as a flat rate you enter. Credits and local taxes are not modelled.

Sources

• IRS: Self-employment tax (Social Security and Medicare)
• IRS: 2026 tax inflation adjustments (Rev. Proc. 2025-32)
• IRS: Estimated taxes

Estimates only, not tax advice. See our disclaimer.

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