How to use the 1099 vs W-2 calculator
- Enter w-2 employee details. Fill in w-2 pay type, w-2 base salary.
- Enter 1099 contractor details. Fill in 1099 hourly rate, hours / week.
- Enter your numbers. Fill in state, filing status.
- Read your results. Results update instantly. The headline shows the 1099 rate needed to match w-2 take-home; the breakdown and table below show the details.
How 1099 and W-2 taxes differ
On a W-2 paycheck you pay FICA of 7.65%: 6.2% Social Security (on wages up to the 2026 wage base of $184,500) and 1.45% Medicare, plus 0.9% Additional Medicare on wages above $200,000. Your employer pays a matching 7.65% that never shows up on your stub.
As a 1099 contractor there is no employer, so you pay both halves through self-employment (SE) tax. Two tax-law features soften the hit: you deduct half of your SE tax when figuring income tax, and most sole proprietors can take the qualified business income (QBI) deduction.
The formulas (2026)
SE tax = 12.4% × min(92.35% × net, $184,500) + 2.9% × 92.35% × net + 0.9% × (92.35% × net) over $200,000 ($250,000 joint)
Half-SE deduction = (SS + regular Medicare portion of SE tax) ÷ 2
QBI deduction = 20% × (net − half-SE), limited to 20% of taxable income; phases out for service businesses above $201,750 taxable income ($403,500 joint)
How to use the results
The headline is the break-even 1099 hourly rate: the rate at which your contractor take-home equals your W-2 take-home for the same hours. The table shows each tax line side by side so you can see where the money goes. If you compare offers, try the salary to hourly calculator to convert pay, and the paycheck calculator to see W-2 withholding per pay period.
What this comparison leaves out
This is a tax-only comparison. Real contract decisions also involve benefits you’d lose (health insurance, retirement match, paid time off), business expenses you could deduct, and unbilled time between contracts. Weigh those separately once you know the tax gap.
Worked example
With these inputs: w-2 pay typeAnnual salary; w-2 base salary$100,000; 1099 hourly rate$60; hours / week (both)40; stateTexas; filing statusSingle.
The calculator gives a 1099 rate needed to match w-2 take-home of $49.15/hr (at $60.00/hr you take home $15,695 more per year as a contractor). Other results: w-2 take-home$79,180, 1099 take-home$94,875, difference (1099 − w-2)+$15,695, extra payroll tax as 1099$9,984.
What your results mean
The break-even rate is the 1099 hourly rate at which your contractor take-home equals your W-2 take-home for the same hours. A positive difference means the contract pays more after tax; a negative one means you’d take home less.
Tips
- Set aside roughly 25–30% of 1099 income for taxes and pay quarterly estimates.
- Track deductible business expenses; they lower both income tax and SE tax.
- Separately estimate the value of benefits you’d give up before accepting a contract.
Frequently asked questions
How much more should a 1099 contractor charge than a W-2 employee?
On taxes alone, usually only a few percent more at moderate incomes, because the extra 7.65% SE tax is partly offset by the half-SE and QBI deductions. Use the calculator for your exact break-even rate; benefits and unpaid time push the real number higher.
What is the self-employment tax rate for 2026?
15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net earnings. The Social Security part stops at $184,500 of earnings in 2026, and a 0.9% Additional Medicare tax applies above $200,000 ($250,000 married filing jointly).
Why is SE tax charged on 92.35% of net income?
The 92.35% factor (100% − 7.65%) mimics the fact that employees aren’t taxed on the employer’s half of FICA, so contractors and employees are treated similarly.
Do 1099 contractors get the QBI deduction?
Most sole proprietors and single-member LLCs do. It equals up to 20% of qualified business income, limited to 20% of taxable income, and phases out for specified service businesses above $201,750 of taxable income ($403,500 joint) in 2026.
Is half of self-employment tax deductible?
Yes. The employer-equivalent half of SE tax is an above-the-line deduction that lowers income tax (not SE tax itself).
Do I pay state income tax differently as a 1099 worker?
Rates are the same, but your state taxable income is lower by the half-SE deduction in most states. California’s SDI applies to W-2 wages, not self-employment income unless you opt in.
Does a 1099 contractor pay quarterly taxes?
Usually yes. With no withholding, the IRS expects estimated payments in April, June, September and January if you’ll owe $1,000 or more.
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