Finance
1099 vs W-2 Calculator
Is that 1099 offer really better than your W-2? Compare them apples-to-apples by including self-employment tax, the benefits you'd replace yourself, and deductible business expenses.
Quick answer: A fair 1099 rate is usually 1.4–1.6× the equivalent W-2 hourly rate to cover self-employment tax, lost benefits, and unbillable time.
W-2 offer
1099 offer
How it works
1. Account for the employer-side payroll tax
A W-2 employer pays half of your FICA (7.65%) and withholds the other half. As a 1099 contractor you pay both halves as the 15.3% self-employment tax. To compare fairly, a contract rate needs to be roughly 15% higher just to offset this self-paid payroll tax.
2. Value the benefits you lose or gain
W-2 jobs often include health insurance, a 401(k) match, paid time off, and unemployment coverage — real compensation that 1099 work does not provide. A contractor must buy their own health coverage and fund retirement alone. Add the dollar value of these benefits to the W-2 side before comparing.
3. Compare true take-home
Net both sides down to after-tax, after-benefit take-home. Contractors can deduct business expenses and the QBI deduction, which helps, but they also carry self-employment tax and benefit costs. The calculator estimates the equivalent W-2 salary or contract rate so you can negotiate from a real number.
Frequently asked questions
How much more should a 1099 rate be than a W-2 salary?
A fair 1099 rate is typically 1.4–1.6× the equivalent W-2 hourly rate. The premium covers self-employment tax, benefits you now buy yourself, and unbillable time.
What makes a W-2 job worth more than the salary suggests?
Employer-paid health insurance, the 401(k) match, paid time off, and the employer's half of FICA all add real value that a higher 1099 rate has to overcome.
What's the break-even rate?
It's the hourly 1099 rate at which your net pay matches the W-2 offer after SE tax, expenses, and replacement benefits. Anything above it favors the contract; below it favors the W-2.