1099 vs W-2 Calculator
Choosing between a job and a contract? See what you’d keep from each after tax and benefits, and what a contract has to pay to match the job.
The 1099 contract leaves you
$12,399 more a year
You’d keep $66,334 from the job and $78,733 from the contract.
| Item | W-2 job | 1099 |
|---|---|---|
| Pay | $80,000 | $115,200 |
| Business expenses | $0 | −$2,000 |
| Health insurance | −$1,672 | −$9,804 |
| Social Security and Medicare | −$5,992 | −$15,995 |
| Federal income tax | −$8,402 | −$8,669 |
| State and local tax | $0 | $0 |
| Employer retirement match | +$2,400 | $0 |
| What you keep | $66,334 | $78,733 |
To match this job, a contract has to pay about $97,392 a year, or $50.73 an hour at your hours. That’s 22% more than the salary.
This contract is worth about the same as a $97,625 W-2 salary with these benefits.
Your employer would pay another $5,992 of Social Security and Medicare. As a contractor you pay that half too.
2026 tax estimate with the standard deduction and no other income. The 1099 side includes the deductions for half of self-employment tax, qualified business income and health insurance. Paid leave, unemployment insurance and job security aren’t counted.
Why a 1099 contract has to pay more
A higher rate can look better than it is. A contractor pays for four things an employer normally covers:
- The employer’s half of payroll tax. Employees pay 7.65% for Social Security and Medicare, and so does the employer. Contractors pay self-employment tax of 15.3% on 92.35% of their profit, with the Social Security part stopping at $184,500 of earnings.
- Benefits. On average, employers pay $8,132 of a $9,804 health premium for one person, according to KFF, and a retirement match is money you’d otherwise go without.
- Time off. Vacation, holidays, sick days and gaps between clients are all unpaid. That’s why the calculator asks for the weeks you’d really bill.
- Business costs. Software, equipment, insurance and accounting come out of your pay, although they do lower your tax.
Contractors do get tax breaks that employees don’t: deductions for half of the self-employment tax, for health insurance and for up to 20% of qualified business income. Many quick comparisons leave these out, which makes the contract look worse than it is. This calculator includes them.
What a contract must pay to match a W-2 salary
| W-2 salary | Per hour at the job | 1099 pay to match | More per year | 1099 rate to match |
|---|---|---|---|---|
| $50,000 | $24.04 | $66,434 | 33% | $34.60 |
| $60,000 | $28.85 | $77,266 | 29% | $40.24 |
| $80,000 | $38.46 | $97,392 | 22% | $50.73 |
| $100,000 | $48.08 | $118,467 | 18% | $61.70 |
| $120,000 | $57.69 | $139,571 | 16% | $72.69 |
| $150,000 | $72.12 | $170,463 | 14% | $88.78 |
Single filer, federal tax only. The job has a 3% retirement match and a $1,672 health share, over 2,080 paid hours. The contract has $2,000 of expenses and $9,804 of health insurance, over 1,920 billed hours (40 hours for 48 weeks).
Look at the two right-hand figures. An $80,000 job needs 22% more per year, but 32% more per hour. That’s why rules of thumb disagree so much: some compare yearly pay, others compare hourly rates. If you’re quoting a rate, use the hourly figure.
What a 1099 hourly rate is worth as a salary
| 1099 rate | 1099 pay a year | W-2 salary worth the same |
|---|---|---|
| $30 an hour | $57,600 | $40,420 |
| $40 an hour | $76,800 | $58,808 |
| $50 an hour | $96,000 | $78,478 |
| $60 an hour | $115,200 | $97,625 |
| $75 an hour | $144,000 | $126,159 |
| $100 an hour | $192,000 | $174,542 |
Same assumptions as above, with the job’s retirement match set at $2,400.
What the numbers leave out
Money isn’t the only difference. Some things don’t fit in a calculator, so weigh them yourself:
- Worker protections. The federal minimum wage and overtime rules cover employees, not independent contractors.
- Safety nets. Contractors generally don’t get unemployment insurance or workers’ compensation, and income can stop when a client leaves.
- Paperwork. You’d set money aside and pay taxes quarterly, and keep your own records.
- Independence. You choose your clients and how you work, and you can often raise your rates or take on more clients.
- Retirement. No match, but self-employed retirement plans can let you save more of your own money.
You can’t always choose 1099 or W-2
A title or a signed contract doesn’t decide this. The IRS looks at three things: behavioral control (who directs how the work is done), financial control (who controls the business side of the job) and the type of relationship (such as benefits and how permanent the work is). The Department of Labor uses a separate test for wage rules, based on the economic reality of the work, and it proposed changes to that rule in February 2026.
If you’re treated as a contractor but work like an employee, you or the business can file Form SS-8 and ask the IRS to decide. Some misclassified workers can use Form 8919 to pay only the employee’s share of Social Security and Medicare.
Next steps
- Taking the contract? The 1099 tax calculator shows what to set aside and your quarterly payments, and a client will ask you for a W-9.
- Taking the job? The paycheck calculator shows your take-home pay, and you’ll need a W-4.
- Doing both? Enter your job in the 1099 tax calculator, under “I also have a W-2 job”.
Frequently asked questions
How much more should a 1099 job pay than a W-2 job?
In our examples, about 14% to 33% more a year for salaries from $50,000 to $150,000. The gap is bigger per hour, because contractors usually bill fewer hours. An $80,000 salary needs about $97,392 a year as a contractor, which is $50.73 an hour compared with $38.46.
What is $50 an hour on a 1099 worth as a W-2 salary?
About $78,478 a year for a single filer billing 40 hours for 48 weeks, before state tax. That's with $2,000 of expenses, $9,804 of health insurance, and a job that includes a $2,400 retirement match.
Do 1099 workers pay more tax than W-2 employees?
On the same pay, they usually pay more in Social Security and Medicare, because they pay both halves: 15.3% on 92.35% of profit, compared with 7.65% for an employee. Income tax is often lower, because they can deduct half of the self-employment tax, business expenses, health insurance and up to 20% of qualified business income.
Is it better to be 1099 or W-2?
It depends on the rate. At the same headline pay, a W-2 job almost always leaves you better off, and it comes with protections a contractor doesn’t get. A contract is worth it if it pays clearly more than the break-even figure above, or if you value the independence enough to accept less.
Can I choose whether to be 1099 or W-2?
Not just by agreeing to it. The IRS looks at how much control the business has over the work, the money side of the job, and the relationship between you. If you think you’re misclassified, you or the business can file Form SS-8 and ask the IRS to decide, which can take six months or more.
Can a 1099 contractor deduct health insurance?
Usually, yes. If your business makes a profit, you can deduct the premiums you pay on Form 7206. It lowers income tax but not self-employment tax, and you can’t take it for any month you could have joined an employer’s plan, including a spouse’s.
How much does an employer save with a 1099 worker?
The employer skips its 7.65% share of Social Security and Medicare, federal unemployment tax of usually $42 per employee, and any benefits. Benefits make up about 30% of what private employers spend on workers, according to the Bureau of Labor Statistics. The savings don’t make a 1099 legal: a business that misclassifies an employee can be held liable for the taxes.
Sources
- IRS: Independent contractor (self-employed) or employee?
- IRS Topic 762: Independent contractor vs. employee
- IRS Topic 751: Social Security and Medicare withholding rates
- IRS Topic 759: Federal unemployment tax
- IRS: Instructions for Form 7206, Self-Employed Health Insurance Deduction
- IRS: Qualified business income deduction
- IRS Rev. Proc. 2025-32 (2026 brackets and standard deduction)
- US Department of Labor Fact Sheet #13: Employee or independent contractor
- Bureau of Labor Statistics: Private industry compensation costs, June 2026
- KFF: 2026 Employer Health Benefits Survey
Estimates only, not tax or legal advice. The calculator assumes the standard deduction, no other income, and one year at the rates you enter. It compares money in the year, so an employer's retirement match counts in full even though you'd pay tax on it when you withdraw it. Your own retirement savings aren't included on either side. Health figures are KFF's 2026 averages for single coverage on a job plan, and an individual plan can cost much more or less.
Built and checked by the WageSimply team, led by Engr. Zakir, an engineer and Google-certified data analyst. Updated for the 2026 tax year and last reviewed .