Compare your W-2 and 1099 offers
W-2 offer, per year
1099 offer, per year
Both totals are before federal and state income tax. This is an estimate, not tax advice. It uses 2026 rates and assumes this is your only job. See how it works below.
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How the calculator compares W-2 and 1099 pay
A W-2 rate and a 1099 rate aren't the same kind of number. An employer pays half of your Social Security and Medicare tax, usually pays part of your health insurance, may match your retirement savings, and pays you for time off. A contractor pays all of that themselves. The calculator puts both offers on the same footing: the total yearly value before income tax.
W-2 side
- Gross pay. A salary is used as entered. Hourly pay is rate × hours × the weeks you work, plus your paid time off (days ÷ 5), capped at the weeks you take off.
- Minus your FICA. 6.2% Social Security on pay up to the 2026 wage base of $184,500, plus 1.45% Medicare on all pay.
- Plus benefits. The employer's health premium contribution, the 401(k) match and any other benefits you enter.
1099 side
- Gross pay. An annual figure is used as entered. An hourly rate is rate × hours × the weeks you work. Time off is unpaid.
- Minus business expenses. This gives your net earnings.
- Minus self-employment tax. 12.4% Social Security on 92.35% of net earnings up to $184,500, plus 2.9% Medicare on all of it. Nothing is owed below $400 of net earnings.
The break-even rate is the hourly 1099 rate at which the two totals are equal. The salary equivalent works the other way: the W-2 salary, with the benefits you entered, that equals your 1099 offer.
What it leaves out
Income tax is left out on purpose. On the same income it's broadly similar either way, and including it would make the comparison depend on your filing status and state. Two tax rules favor contractors and aren't counted: you can deduct half of your self-employment tax, and you may qualify for the qualified business income (QBI) deduction. So the 1099 total here is slightly conservative. The extra 0.9% Medicare tax above $200,000 (single) applies under both arrangements, so it's left out too.
Sources: IRS Topic 554, Self-employment tax · SSA contribution and benefit base · KFF 2025 Employer Health Benefits Survey (average single premium $9,325, workers pay 16%). Figures last checked October 24, 2026.
Is $50 an hour on a 1099 better than $40 an hour on a W-2?
Take a remote role offered two ways: $40/hour as an employee or $50/hour as a contractor. You work 40 hours a week and take 4 weeks off a year. The W-2 job pays 15 days of time off, contributes $7,800 to health insurance and matches 3% in a 401(k). As a contractor you'd spend about $2,000 a year on equipment and software.
| W-2 at $40/hr | 1099 at $50/hr | |
|---|---|---|
| Gross pay | $81,600 | $96,000 |
| Business expenses | — | −$2,000 |
| Social Security & Medicare | −$6,242 | −$13,282 |
| Health contribution | +$7,800 | — |
| 401(k) match | +$2,448 | — |
| Total value | $85,606 | $80,718 |
The contract offer looks $10/hour richer but comes out about $4,900 a year behind. To match the W-2 job, the contract rate would need to be about $53/hour, or 1.32 times the W-2 rate. Put another way, $50/hour on a 1099 is worth about the same as a $76,500 W-2 salary with those benefits.
Benefits drive most of that gap. If the W-2 job had no health plan, no match and no paid time off, the break-even would drop to about $44/hour, or 1.10 times. That remaining 10% is mostly the employer's half of Social Security and Medicare, plus the $2,000 of expenses. So before you compare rates, find out what benefits the W-2 offer actually includes.
What changes when you go from W-2 to 1099
- Nobody withholds your taxes. Contractors generally pay estimated tax four times a year on Form 1040-ES, around mid-April, mid-June, mid-September and mid-January. Missing them can mean an underpayment penalty.
- You lose the safety nets. Independent contractors generally can't claim unemployment insurance or workers' compensation from a client.
- You arrange your own benefits. Health coverage comes from the Marketplace, a spouse's plan or a private policy. Self-employed people can usually deduct those premiums. For retirement, a SEP IRA or solo 401(k) replaces the employer plan.
- You can deduct business costs. Equipment, software, a home office and professional fees reduce your net earnings, and with them your self-employment tax.
- You get control. You set your hours and methods, and you can work for several clients at once. That is also what legally makes you a contractor.
Who decides whether you're W-2 or 1099?
Not the contract alone. The IRS looks at the facts of the working relationship, which it groups into three categories:
- Behavioral control. Does the company control or have the right to control what you do and how you do it?
- Financial control. Does it control the business side of the job, such as how you're paid, whether expenses are reimbursed and who provides tools?
- Relationship of the parties. Are there employee-type benefits, a written contract, and is the work a key part of the company's business?
If a "contract" role sets your schedule, trains you on its methods and keeps you on as an ongoing part of the team, you may be an employee in fact. You can ask the IRS for an official determination by filing Form SS-8. Some states apply stricter tests of their own.
W-2 vs 1099 — FAQ
How much more should a 1099 contractor charge than a W-2 employee?
Enough to cover the employer's half of Social Security and Medicare, the benefits you give up, any unpaid time off and your own business costs. In our worked example, a $40/hour W-2 job with health coverage, a 3% 401(k) match and three weeks of paid time off is worth about the same as $53/hour on a 1099, or 1.32 times the W-2 rate. Without those benefits, the break-even drops to about $44/hour, or 1.10 times.
What is the self-employment tax rate in 2026?
15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of your net self-employment earnings, and the 12.4% Social Security part stops at the 2026 wage base of $184,500. You generally owe it once your net earnings reach $400. An extra 0.9% Medicare tax applies above $200,000 for single filers.
Is 1099 or W-2 better?
Neither is better in general. A W-2 job usually wins on total value when it comes with health coverage, a retirement match and paid time off, and it also comes with unemployment insurance and workers' compensation. A 1099 role wins when the rate is high enough to cover those costs, and it gives you more control over when, how and for whom you work. Run both offers through the calculator with their real numbers.
Does this calculator include income tax?
No. It compares both offers before federal and state income tax, because income tax on the same income is broadly similar either way. Two differences favor the contractor: you can deduct half of your self-employment tax, and you may qualify for the qualified business income (QBI) deduction. Both lower your income tax, so the 1099 result here is slightly conservative.
Can an employer choose to pay me on a 1099 instead of a W-2?
Not freely. The IRS decides worker status from the facts of the relationship, grouped as behavioral control, financial control and the relationship of the parties. If a company controls what you do and how you do it, you are likely an employee no matter what the contract says. If you think you have been misclassified, you can ask the IRS for a determination with Form SS-8.