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Free 1099 vs W-2 Calculator
Compare a W-2 job offer against a 1099 contract side by side. The calculator models the structural tax differences — employee FICA vs self-employment tax, the QBI deduction, self-employed health insurance, business expenses, and employer benefits — then solves for the 1099 rate that matches your W-2 net take-home.
Use 2026 for current-year planning; switch to 2025 for the return you file in early 2026.
Shared
2026 ratesUsed for the true hourly-rate comparison. 2,080 = full-time year.
W-2 offer
Employer benefits = 401(k) match + employer-paid health share + other perks. Counted toward total value, not cash.
1099 offer
Try a scenario
W-2 take-home
$84,250
1099 take-home
$94,672
Difference
1099 nets $10,422 more
Rate to match your W-2
To match the W-2 net take-home as a 1099 contractor you would charge about $133,846/yr (≈ $64/hr).
1099 breakdown
True hourly value
W-2
$84,250
1099
$94,672
1099 nets $10,422 more
Rate to match the W-2: about $64/hr ($133,846/yr).
⚠️ 1099 income requires quarterly estimated tax payments. As a contractor no tax is withheld for you — you must send quarterly 1040-ES payments, or an underpayment penalty applies under IRC §6654. The comparison also excludes non-financial trade-offs (PTO, unemployment insurance, benefit security) and assumes a sole proprietorship — an S-corp election can change the 1099 math.
1099 advantage
$10,422
📐 Open methodology, sources & limitations
Formula
W-2 side: employee FICA = 6.2% to the SS wage base + 1.45% Medicare (+0.9% above threshold) taxable = salary − standard deduction (selected year) net take-home = salary − FICA − federal tax − state tax − health premium total value = net take-home + employer-paid benefits 1099 side: net SE profit = gross − business expenses SE tax = 92.35% × net profit × (12.4% to SS wage base + 2.9% Medicare) QBI deduction = 20% × (net profit − ½ SE tax − SE health insurance) taxable = net profit − ½ SE tax − SE health − standard deduction − QBI net take-home = gross − expenses − SE health − SE tax − federal tax − state tax Rate to match = the 1099 gross at which 1099 net take-home equals W-2 net take-home, found by binary search.
Assumptions
- Federal brackets and standard deduction follow the selected tax year. 2025 standard deduction (post-OBBBA): $15,750 single, $31,500 MFJ, $23,625 HoH. 2026: $16,100, $32,200, $24,150.
- Self-employment tax uses the 92.35% multiplier, 12.4% Social Security to the wage base ($176,100 in 2025; $184,500 in 2026), and 2.9% Medicare (IRC §1401 / §1402).
- Half of self-employment tax (IRC §164(f)) and self-employed health insurance (IRC §162(l)) are deducted above the line.
- A 20% Qualified Business Income deduction (IRC §199A) is applied to qualified business income.
- State income tax is a flat effective rate you enter — full state bracket modeling is not performed.
- Employer benefits value is counted toward W-2 total value but not toward cash take-home.
Sources
- IRC §1401 / §1402 — Self-Employment Tax and net earnings — §1401
- IRC §164(f) — Deduction for one-half of self-employment tax — §164(f)
- IRC §199A — Qualified Business Income deduction — §199A
- IRC §162(l) — Self-employed health insurance deduction — §162(l)
- IRS Schedule SE Instructions — Self-Employment Tax
- IRS Rev. Proc. 2024-40 — 2025 brackets and standard deduction, as modified by OBBBA (July 4, 2025)
- IRS Rev. Proc. 2025-32 — 2026 brackets and standard deduction
This tool does NOT model:
- S-corporation election, which can reduce SE tax above roughly $80k of profit
- QBI deduction phaseout, the specified-service-business rules, and the W-2-wage limitation
- State-specific bracket detail and any separate state self-employment tax
- ACA premium tax credits, subsidies, and COBRA
- Multi-state work, and retirement contribution-limit differences between the two structures
- Tax years other than 2025 and 2026 — brackets and limits adjust annually
Last reviewed: 2026-06-12 · Tax year modeled: 2025 & 2026 (selectable)
This methodology section exists so you can verify the math. We show our formulas because you deserve to know how a number was calculated. This is calculation transparency, not financial advice.
What changed for 2026
Two inputs to this comparison moved for 2026. The standard deduction — which both sides of the comparison subtract — rose with the IRS inflation adjustments in Rev. Proc. 2025-32. And the Social Security wage base climbed from $176,100 to $184,500, which raises FICA on the W-2 side and self-employment tax on the 1099 side for earners in that range. The FICA and SE tax rates themselves, the 92.35% SE multiplier, and the 20% QBI deduction are unchanged. Toggle the tax year in the calculator above to see how the break-even rate shifts.
| Figure | 2025 | 2026 |
|---|---|---|
| Social Security wage base | $176,100 | $184,500 |
| Standard deduction — single | $15,750 | $16,100 |
| Standard deduction — married filing jointly | $31,500 | $32,200 |
| SE tax rate (SS + Medicare) | 15.3% | 15.3% |
Why a 1099 offer needs a bigger number
The headline question — “the contract pays more, so it's better, right?” — misses the structural cost shift. As a W-2 employee, your employer pays half of your FICA (7.65%) and usually funds health insurance, a 401(k) match, paid time off, and unemployment insurance. As a 1099 contractor you pay both halves of FICA as self-employment tax, buy your own health insurance, and fund your own benefits. A 1099 rate that simply matches a W-2 salary is effectively a pay cut.
It is not all one direction. Contractors deduct genuine business expenses, deduct half of their SE tax and their health-insurance premiums above the line, and take the 20% Qualified Business Income deduction — none of which a W-2 employee gets. This calculator nets those forces against each other and solves for the 1099 gross that actually equals your W-2 net take-home.
The non-financial side
W-2 advantages: paid time off, employer-funded FICA, unemployment-insurance eligibility, sick leave, and far simpler tax filing. 1099 advantages:business-expense deductions, much higher retirement contribution limits (SEP-IRA or Solo 401(k)), the QBI deduction, the ability to work for several clients, and rate control. The calculator compares the money; the rest is judgment.
Reading the comparison
- Compare net take-home, not gross. A $150k W-2 and a $150k 1099 are not the same — the 1099 owes self-employment tax and buys its own benefits.
- Use the “rate to match.” It is the most useful number for negotiating: the 1099 annual gross (and hourly rate) that leaves you with the same cash as the W-2 offer. To build a rate from your own costs and billable hours instead, use the freelance rate calculator.
- Budget for quarterly taxes. Contractors have no withholding. Quarterly 1040-ES payments are required, and underpayment triggers a penalty under IRC §6654 — see the quarterly estimated tax calculator.
- Consider an S-corp at higher profit. Above roughly $80k of net profit, an S-corp election can reduce self-employment tax. That is a different calculation this tool does not model.
- This is an estimate, not advice. Your actual outcome depends on your full-year picture, your state, your benefits, and your retirement strategy. Confirm with a CPA before changing employment structure.
Frequently Asked Questions
Should I take the 1099 offer over the W-2 offer?+
It depends entirely on the numbers and the non-financial trade-offs. Enter both offers and the calculator shows the net take-home of each. A 1099 rate has to be meaningfully higher than a W-2 salary to break even, because the contractor pays both halves of FICA and funds their own benefits.
What rate do I need to charge as a 1099 contractor to match my W-2?+
The calculator solves for exactly this — the "rate to match" is the 1099 annual gross (and hourly rate) at which your 1099 net take-home equals your W-2 net take-home. It is the most useful number for negotiating a contract rate.
What is the self-employment tax I will owe?+
Self-employment tax is both halves of FICA — 15.3% applied to 92.35% of your net business profit, with the 12.4% Social Security portion capped at the wage base and the 2.9% Medicare portion uncapped (IRC §1401). The calculator computes it from your 1099 gross minus business expenses.
How does the QBI deduction work?+
The Qualified Business Income deduction (IRC §199A) lets many self-employed people deduct 20% of their qualified business income for federal income tax. This calculator applies the 20% deduction; above the income thresholds the deduction is subject to phaseout and specified-service-business rules that are not modeled here.
Can I really deduct health insurance as self-employed?+
Yes. Self-employed people can deduct health-insurance premiums above the line under IRC §162(l), reducing adjusted gross income. A W-2 employee generally cannot deduct their share of premiums the same way.
What about the employer 401(k) match — how do I replace that?+
A W-2 match is free money a contractor does not get. Contractors instead have much higher retirement contribution limits through a SEP-IRA or Solo 401(k). The calculator counts the employer match within "employer benefits value" on the W-2 side.
How much should I set aside for taxes as a 1099 contractor?+
A common rule of thumb is 25–35% of net profit, but the right figure depends on your bracket and state. Use the calculator’s 1099 breakdown — SE tax plus federal and state income tax — as a more precise target, and pay it quarterly.
What if I have both W-2 and 1099 income in the same year?+
W-2 wages use up part of the Social Security wage base first, which can reduce the Social Security portion of SE tax on your contract income. This calculator compares two standalone offers; a mixed year is more complex and worth a CPA review.
When do I have to make estimated tax payments?+
Contractors generally must pay quarterly 1040-ES estimated taxes (mid-April, mid-June, mid-September, mid-January) because no tax is withheld. Underpayment triggers a penalty under IRC §6654.
Is incorporating as an LLC or S-corp worth it?+
It depends. Above roughly $80,000 of net profit, an S-corp election can reduce self-employment tax by splitting income into salary and distributions. That is a separate calculation with its own costs and payroll requirements — this tool models a sole proprietorship.
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