1099 vs W-2 Calculator

A narrower comparison that you can audit

“True take-home” cannot be known from four inputs. A full comparison would need business expenses, filing status, deductions, credits, state taxes, paid leave, insurance details, retirement matching, unemployment coverage, and the probability of unpaid downtime. This calculator deliberately answers a narrower question: what is each offer worth after standard federal Social Security and Medicare taxes, with employer-paid benefits added to the W-2 side?

The contractor's annual gross is hourly rate × hours per week × 52. Regular self-employment tax uses 92.35% of that amount as its base, applies 12.4% Social Security tax up to the 2026 wage base, and applies 2.9% Medicare tax without a cap. The employee side applies 6.2% Social Security and 1.45% Medicare to salary, subject to the same Social Security ceiling.

For 2026, the Social Security contribution and benefit base is $184,500, according to the Social Security Administration. The payroll rates are established by IRC sections 1401, 3101, and 3111. The model omits Additional Medicare Tax because filing status and combined household wages are unknown.

Rates current as of September 2026.

What the break-even rate means

The break-even 1099 rate is the hourly price at which annual contractor gross minus modeled SE tax equals W-2 salary minus employee FICA plus entered benefits. The calculator solves that equation directly, including the Social Security cap. It is not a rule that contractors should accept that rate.

Contractors fund costs employees may receive separately: health coverage, retirement contributions, equipment, accounting, insurance, paid leave, training, and time spent finding work. Add those costs mentally to the W-2 advantage or raise the benefits input when the employer truly pays them. Do not include employee payroll deductions that merely buy a benefit; enter the employer-paid economic value.

Weekly hours also need consistent interpretation. For the employee, they are paid hours. For the contractor, they must be invoiceable hours. If a contractor plans to work 40 hours but can invoice only 28, enter 28. The 52-week assumption means reducing that weekly average to account for unpaid vacation and gaps. The freelance hourly rate calculator offers a more detailed capacity model.

Worked 2026 comparison

Suppose the contractor offer is $75 per hour for 40 billable hours each week and the employee offer is a $100,000 salary plus $15,000 of employer-paid benefits. The 1099 gross is $75 × 40 × 52 = $156,000. Under the 2026 Schedule SE rules, the modeled regular SE tax is $22,042.10, leaving $133,957.90 before income tax and business expenses. On the employee side, the 2026 6.2% Social Security and 1.45% Medicare rates produce $7,650 of employee FICA. Adding benefits gives modeled W-2 value of $107,350. The $26,607.90 gap is not pure take-home: contractor insurance, leave, overhead, and income tax still need to be priced.

Common mistakes and edge cases

• Comparing a 40-hour paid employee week with 40 contractor hours when only part of contractor time is billable.
• Entering the retail price of benefits rather than the amount the employer actually contributes.
• Forgetting equipment, insurance, retirement match, paid leave, unemployment coverage, and collection risk.
• Treating payroll-tax value as full after-tax income when federal and state income taxes are excluded.
• Choosing a 1099 label for convenience when the facts indicate employee control and classification.

Classification and taxes beyond FICA

A contract label does not determine worker status. The IRS looks at behavioral control, financial control, and the relationship of the parties; see the IRS worker-classification guidance. Misclassification can create tax and labor-law consequences.

Federal income tax is excluded from both sides because applying the same headline bracket would be misleading. The deductible half of SE tax affects adjusted gross income, business expenses may reduce contractor profit, and employee benefits can have different tax treatment. State payroll programs and unemployment insurance are also excluded.

Use this result as an auditable starting point, then build a personal offer comparison with actual insurance quotes, retirement match rules, paid-time-off value, deductible contractor expenses, and a complete tax projection.

What to do next

Ask the employer for benefit contribution details and paid-time-off rules. Build the contractor side from realistic invoiceable hours and written quotes for insurance and overhead. Then compare both choices using the same household tax assumptions and assign a value to flexibility only if it is genuinely available. If classification is uncertain, resolve that legal question separately from compensation.

Disclaimer: This tool provides general information only and is not tax, employment, or legal advice.