1099 vs. W-2 Calculator
A bigger contract rate isn't always more money. See what you'd need to charge as a 1099 contractor to truly match a W-2 salary.
What the employer pays on your behalf — roughly $8k–$15k is typical.
Compare a 1099 contract rate against a W-2 salary
This free 1099 vs. W-2 calculator answers the question every freelancer and contractor eventually faces: is the contract offer actually better than the salaried job? A 1099 rate almost always looks bigger on paper — but once you account for self-employment tax, lost employer benefits, and unpaid time off, the gap narrows fast and sometimes flips. The calculator does that comparison in seconds, entirely in your browser.
Enter the W-2 salary, the value of its benefits, and the 1099 contract's annual gross and expenses. The tool estimates take-home for each option and solves for the annual income and equivalent hourly rate needed to match the salaried package under those assumptions.
Why a 1099 rate has to be higher than a salary
A W-2 employee pays only half of FICA — 7.65% — and the employer quietly covers the other half. A 1099 contractor pays both halves themselves as the 15.3% self-employment tax. That difference alone means a contractor keeps less of every dollar than an employee earning the same headline number.
On top of the tax gap, contractors get no employer-paid health insurance, no 401(k) match, no paid vacation or sick days, and no unemployment coverage. Those benefits are real compensation a salary includes and a contract rate does not — which is why a contract rate that looks larger can be worth less in the bank.
How this calculator works
For the W-2 side, the tool estimates take-home after payroll tax, federal income tax, and a state planning allowance, then adds employer benefits. For the 1099 side, it subtracts business expenses and applies the same 2026 federal engine, including QBI only when the supplied facts are sufficient.
Finally it runs a search to find the annual contract gross whose take-home matches the salary's total value — and divides that by full-time hours to give you a target hourly rate. That target is your negotiating floor.
What the calculator doesn't capture
Everyone's benefits package and deductions differ, and self-employment has real upsides this tool can't price: multiple clients, schedule control, far higher retirement-contribution limits, and more deductible expenses. Treat the result as a clear-eyed financial floor, not the whole decision.
Frequently asked questions
How much more should a contractor charge than an equivalent salary?+
A rough industry rule is 25–50% above the equivalent W-2 salary, but the honest answer is whatever covers the extra 7.65% of self-employment tax plus the benefits you now buy yourself. This calculator gives you the specific number instead of a rule of thumb.
Does the calculator include the QBI deduction?+
It applies the 2026 QBI rules for straightforward cases below the income threshold. Above the threshold, the correct deduction can depend on business type, payroll and property, so the calculator conservatively uses no QBI deduction rather than inventing those facts.
Is a 1099 contract ever better than a W-2 job?+
Often, yes — especially with multiple clients, strong expense deductions, and a Solo 401(k). This tool only compares take-home pay; it can't price the flexibility and tax-planning room that come with self-employment.
What's the real tax difference between 1099 and W-2 income?+
A contractor pays both the worker and employer shares of Social Security and Medicare, while a W-2 worker directly pays the employee share. Social Security is capped at the annual wage base; Medicare and Additional Medicare rules continue above it. Business deductions and any supported QBI deduction can narrow the gap.
Stop running the numbers by hand.
Keep income, expenses, mileage, and estimated-payment records together in TaxClover. Review your projection as your records change. TaxClover does not file returns or send tax payments. Free during beta.