Same gross for both, to compare fairly
Flat estimate; 0 for no-tax states
Health, retirement match, PTO you lose as 1099
Disclaimer
Estimates for educational purposes only — not tax advice. Assumes the standard deduction, a single income source, a simplified QBI deduction, and a flat state rate. It ignores credits, other income, and local taxes. Consult a qualified tax professional before deciding.
How this is calculated
Both scenarios start from the same gross pay so the comparison is fair. We then apply 2026 federal rules:
- W-2: employee FICA (6.2% Social Security to $184,500 + 1.45% Medicare), then federal income tax on gross minus the 2026 standard deduction.
- 1099: self-employment tax (15.3% on 92.35% of profit), then income tax on profit minus the deductible half of SE tax, the standard deduction, and a simplified 20% QBI deduction.
- Benefits you must replace as a contractor (health, retirement match, PTO) are added to the W-2 side.
- Break-even solves for the 1099 gross whose take-home equals the W-2 take-home plus benefits, giving the rate uplift.
Sources
- IRS — Topic No. 751, Social Security and Medicare Withholding Rates
- IRS — Self-Employment Tax
- IRS — Revenue Procedure 2025-32 (2026 brackets, standard deduction, QBI thresholds)
Reviewed against 2026 figures · Last updated June 5, 2026
What is 1099 vs W-2 Calculator?
A 1099 vs W-2 calculator compares your take-home pay as a salaried employee versus an independent contractor at the same gross compensation. A W-2 employee pays only half of Social Security and Medicare (7.65%) and receives employer benefits; a 1099 contractor pays the full 15.3% self-employment tax but can deduct half of it and claim the 20% QBI deduction. This tool uses 2026 federal figures to show both take-home amounts and the rate uplift a contractor needs to break even after replacing lost benefits.
How to Use
- Enter the annual compensation to compare (used as gross for both).
- Choose your filing status and an optional flat state income tax rate.
- Enter the value of benefits you would replace as a 1099 (health, retirement match, PTO).
- Review side-by-side take-home pay for W-2 and 1099.
- Use the break-even uplift to set a fair contractor rate.
Why Use This Tool?
Tips & Best Practices
- As a 1099, aim for 25%–40% above the equivalent W-2 salary
- Most of that uplift covers lost benefits, not just extra payroll tax
- The QBI deduction can meaningfully lower a contractor’s income tax
- Contractors must pay quarterly estimated taxes to avoid penalties
- Open a solo 401(k) or SEP-IRA to shelter more income as a 1099
- No-tax states (TX, FL, WA, etc.) change the comparison — set state to 0
Frequently Asked Questions
How much more should I charge as a 1099 contractor than a W-2 salary?
Often 25%–40% more. The uplift covers the employer-side payroll tax you now pay (7.65%) plus benefits you must replace — health insurance, retirement match, and PTO — which can add another 20%–30%. This calculator computes the exact break-even for your numbers.
Why does a 1099 contractor pay more tax than a W-2 employee?
A W-2 employee pays only the employee half of Social Security and Medicare (7.65%); the employer pays the other half. A 1099 contractor pays both halves as 15.3% self-employment tax, recovering part of it through the deductible half of SE tax and the QBI deduction.
What is the QBI deduction and how does it help 1099 workers?
The qualified business income (QBI) deduction lets many self-employed people deduct up to 20% of net business income, lowering federal income tax. For 2026 it phases in limits above $201,775 (single) or $403,500 (married filing jointly).
Do 1099 contractors get benefits?
No. Contractors generally get no employer health insurance, retirement match, paid time off, or unemployment insurance and must buy these themselves, which is why the equivalent 1099 rate should be higher. Enter your benefits value to see the true break-even.
Is 1099 or W-2 better?
Neither is universally better. W-2 brings benefits and withholding; 1099 brings higher gross rates, business deductions, QBI, and flexibility, but you cover all taxes and benefits and pay quarterly estimated taxes. Use the take-home comparison to decide.
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