NumberTally W-2 vs 1099 Calculator — Compare Employee vs Contractor Take-Home Pay
Put the same gross income through both tax treatments and see which leaves more in your pocket. Includes FICA vs self-employment tax, employer-paid benefits, business expenses — plus the exact 1099 rate you would need to break even with the W-2 offer.
Use the same number for both sides — that is the whole point of the comparison.
Your effective combined rate, not your top bracket.
Health insurance, 401(k) match, PTO — what the employer pays for you.
Insurance, software, equipment, home office, accounting.
Advanced options
6.2% Social Security + 1.45% Medicare. Your employer quietly pays the other 7.65%.
Both halves: 7.65% + 7.65% = 15.3%. Applied to 92.35% of net earnings, per IRS rules.
Simplified — full QBI has income limits ($191,950 single / $383,900 joint for 2024, indexed) and other restrictions.
Where the 1099 premium goes
A contractor pays the employer half of payroll tax (an extra 7.65%), funds their own health insurance and retirement, earns nothing on vacation days, and absorbs business costs and dry spells. Add it up and the widely quoted rule of thumb — a contractor needs roughly 25–40% more than the equivalent salary to break even — is usually in the right neighborhood. This calculator replaces the rule of thumb with your actual numbers.
The breakeven solver below answers the question that matters in a negotiation: “At what 1099 rate am I exactly as well off as the W-2 offer?” Anything above that line is genuine upside; anything below it is a pay cut wearing a higher hourly rate as a disguise.
What this comparison leaves out
These are planning estimates, not a tax return. Real outcomes shift with tax brackets, deductions, retirement contributions (a Solo 401(k) can shelter a lot), business structure — an S-corp election changes the self-employment tax math substantially — and state rules. Use the editable rates to match your situation, and talk to a tax professional before making a classification decision. Estimates only — not tax advice.
Frequently Asked Questions
What is the difference between W-2 and 1099?
A W-2 worker is an employee: the employer withholds income tax, pays half of Social Security and Medicare taxes (7.65%), and usually provides benefits. A 1099 worker is an independent contractor: no tax is withheld, you pay the full 15.3% self-employment tax yourself, and you fund your own benefits, insurance, and time off.
Why is self-employment tax 15.3%?
It is the same two taxes employees pay — 12.4% Social Security and 2.9% Medicare — except contractors pay both the employee half and the employer half, so 7.65% + 7.65% = 15.3%.
What is the “rule of 2” for contractor rates?
The industry rule of thumb that a contractor needs roughly double the hourly equivalent of a comparable salary. The premium covers the extra 7.65% tax half, self-funded benefits and insurance, unpaid time off, and non-billable hours. The breakeven solver above computes your exact number instead.
Do 1099 contractors get any benefits?
Not from the client. Contractors buy their own health insurance, fund their own retirement, and earn nothing during vacations. That is why the calculator includes a benefits input on the W-2 side and business expenses on the 1099 side.
Should I take a 1099 offer just because the hourly rate is higher?
Not necessarily — run the numbers first. A 1099 rate 20% higher than your W-2 hourly equivalent often leaves you worse off once the extra tax half, benefits costs, and unpaid time off are counted. Compare it against the breakeven rate shown above.