W-2 vs 1099 Calculator

A W-2 employee and a 1099 independent contractor are taxed differently in a way that matters a lot when comparing job offers or contract rates: a W-2 employer pays half of your FICA tax (Social Security and Medicare) on your behalf, while a 1099 contractor pays the full 15.3% self-employment tax alone, since there's no employer to split it with. On top of that, a W-2 role typically comes with benefits — employer- paid health insurance, a 401(k) match, paid time off — that a 1099 contract usually doesn't include at all, meaning the contractor has to either self-fund those or go without them. This calculator puts both offers on the same after-tax, after-benefits footing so a straight dollar comparison actually means something.

It also answers the practical negotiating question directly: given a specific W-2 offer, what 1099 rate would you need to actually come out ahead, once self-employment tax and the lost benefits are accounted for? That breakeven figure is usually higher than people expect — it's common industry advice to ask for 20–30% more as a 1099 rate than an equivalent W-2 salary, and this calculator shows you the actual number instead of a rule of thumb.

For the mechanics of self-employment tax itself, or estimating quarterly payments as a 1099 contractor, see the related calculators planned for this category — 1099 Quarterly Tax and Freelancer Tax Set-Aside.

W-2 FICA uses the employee-only rate (6.2% Social Security up to the wage base, plus 1.45% Medicare, plus 0.9% Additional Medicare Tax above $200,000) because the employer pays a matching 6.2%/1.45% separately and it never touches your paycheck. Self-employment tax covers both halves — 12.4% Social Security and 2.9% Medicare — applied to 92.35% of your net self-employment earnings (the 92.35% factor exists to roughly equalize with how W-2 wages are net of the employer's share before FICA is calculated). Half of the self-employment tax is then deductible when calculating federal taxable income, which this calculator applies automatically.

The breakeven 1099 gross income is found by solving for the gross amount that produces 1099 take-home pay exactly equal to the W-2 offer's total value (cash plus benefits) — since take-home pay increases smoothly with gross income, this calculator finds that figure numerically rather than through a closed-form formula.

"W-2 Total Value" combines your actual take-home cash with the estimated dollar value of benefits you'd otherwise have to pay for yourself — health insurance, retirement matching, and paid time off. "1099 Take-Home" is pure after-tax cash, since a contract role typically doesn't include any of those. Comparing these two figures directly tells you which offer leaves you better off in real terms, not just on paper.

The breakeven gross income shows what a 1099 rate would need to be, given the same expense level, to produce take-home pay equal to the W-2 offer's total value — useful as a negotiating anchor if you're being offered a 1099 arrangement instead of an equivalent W-2 role.