What Is a 1099 vs W-2 Calculator and How Does It Work?
A 1099 vs W-2 calculator compares what you keep from a W-2 salary against a 1099 independent contractor rate. W-2 employees split Social Security and Medicare tax (7.65% each) with their employer, while 1099 contractors pay the full 15.3% self-employment tax themselves and receive no employer benefits.
The self-employment tax formula, defined by the IRS on Schedule SE, is: SE tax = net profit × 92.35% × 15.3%, where net profit is gross receipts minus business expenses and the 12.4% Social Security portion applies only to the first $176,100 of earnings in 2025. Half of the SE tax is deductible when computing income tax.
According to the IRS, the 15.3% self-employment rate is made up of 12.4% for Social Security and 2.9% for Medicare. W-2 employers also pay unemployment tax and often contribute to health insurance, which the Bureau of Labor Statistics reports averages roughly 30% of total compensation for private-industry workers.
How to Use This 1099 vs W-2 Calculator
Enter both offers and the comparison updates instantly:
- Annual salary: the gross W-2 pay before tax.
- Employer benefits value: employer-paid health premiums plus any 401(k) match, per year. Include paid time off value by lowering the contractor's billable weeks instead.
- Hourly rate, hours per week, billable weeks: the 1099 offer. Most contractors bill 44 to 48 weeks a year after holidays, sick days and gaps between contracts.
- Business expenses and self-paid health insurance: costs a W-2 employer would normally cover. Health insurance is deductible for the self-employed.
The calculator uses US federal figures only. State income tax, local tax and non-US systems (for example UK Class 2 and 4 National Insurance) are not included, so use our Self-Employment Tax Calculator for other countries.
How Do W-2 and 1099 Compare?
| Item | W-2 employee | 1099 contractor |
|---|---|---|
| Social Security + Medicare | 7.65% (employer pays 7.65%) | 15.3% of 92.35% of net profit |
| Tax withholding | Automatic each paycheck | Quarterly estimated payments |
| Health insurance, 401(k) match | Often employer-subsidised | Self-funded (health premiums deductible) |
| Paid time off | Usually included | Unpaid |
| Business expense deductions | Generally none | Deductible on Schedule C |
Frequently Asked Questions
What hourly rate equals a W-2 salary?
As a rule of thumb, a 1099 contractor needs to charge about 25% to 40% more than the equivalent W-2 hourly wage to match total compensation. The extra covers the employer half of FICA (7.65%), unpaid holidays and vacation, health insurance, and retirement contributions. Use the break-even rate above for an exact figure.
Is 1099 or W-2 better for taxes?
Neither is lower-tax by default. W-2 employees pay 7.65% in Social Security and Medicare tax and their employer pays the other 7.65%. Contractors pay the full 15.3% self-employment tax but can deduct business expenses, half of the SE tax and self-paid health insurance, which narrows the gap.
How much more should a 1099 contractor charge than a W-2 employee?
Most analysts suggest 1.25 to 1.4 times the W-2 hourly equivalent, where the W-2 hourly equivalent is salary divided by 2,080 hours. The exact multiple depends on benefits value, billable weeks, business expenses and your tax bracket.
How accurate is this 1099 vs W-2 calculator?
It estimates 2025 US federal income tax, Social Security and Medicare using the standard deduction and published brackets. It excludes state and local tax, the qualified business income (QBI) deduction, retirement contributions and credits, so treat the result as a comparison aid and confirm details with a tax professional.