1099 vs W-2 Calculator
A 1099 rate must cover the employer taxes and benefits a W-2 job includes. See the equivalent W-2 salary to compare fairly.
Want to understand the concept, not just the number? Read The Self-Employed Business Owner Guide .
How it's calculated
A 1099 contract role and a W-2 job that pay the same number are not equal. As a contractor you are your own employer, so you pay both halves of Social Security and Medicare, and you buy your own benefits. To compare an offer fairly, convert the 1099 pay into the W-2 salary that would leave you in the same place.
Start with the extra tax. A W-2 employee splits payroll tax with their employer, but a contractor pays the whole thing. That employer half, the deductible portion of self-employment tax, is money a salaried worker never sees. On 120,000 dollars of 1099 pay it is about 8,478 dollars. Then subtract the benefits a job would have provided, health insurance, a retirement match, and paid time off. Value those at 12,000 dollars and the 120,000 dollar contract is worth about 99,522 dollars as a W-2 salary.
That gap is why a contract rate should be meaningfully higher than a salary to be worth it, often 25 to 50 percent more once benefits and the extra tax are counted. Contracting has offsetting advantages this does not price, like business deductions, the QBI deduction, and flexibility, which can narrow the gap. But go in knowing the headline number is not the real comparison. Enter your own benefits value to see the equivalent salary for your offer.
Assumptions
- A contractor pays both halves of Social Security and Medicare, so the equivalent W-2 salary subtracts the employer half (the deductible half of SE tax) and the benefits you must self-fund.
- This compares the cash and tax burden. It does not price the flexibility, deductions, or QBI deduction a contractor may gain, which can offset part of the gap.
Last updated: 2026-08-08 · Tax year 2026
These assumptions follow our general methodology.
Frequently asked questions
How much more should a 1099 rate be than a W-2 salary?
Often 25 to 50 percent more, to cover the extra employer payroll tax you carry and the benefits you must buy yourself. The exact premium depends on how valuable the benefits are and your tax situation. This calculator converts a 1099 figure to its W-2 equivalent.
Why do contractors pay more in taxes?
A W-2 employee and their employer split Social Security and Medicare tax. A contractor is both, so they pay the full 15.3 percent as self-employment tax. Half of it is deductible, which softens the blow, but it is still money a salaried worker does not pay.
What benefits should I count?
Anything an employer would provide that you now fund yourself: health insurance premiums, a retirement match, paid time off, and sometimes disability or life insurance. Add up their annual value and enter it, since replacing them is a real cost of contracting.
Are there tax advantages to being a contractor?
Yes. Contractors can deduct legitimate business expenses, contribute to a Solo 401(k) or SEP-IRA, and often claim the QBI deduction. These can offset part of the extra tax and benefits cost, which is why the raw comparison is only a starting point.