1099 vs W-2 Calculator
Compare W-2 employment and 1099 contracting side by side — not just gross pay, but employer benefits, self-employment tax, and business costs — to see which is actually worth more to you.
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"1099 Compensation After Costs" is not the same as take-home pay — it does not subtract federal, state, or local income tax. It represents what's left after business expenses, self-funded benefits, and self-employment tax only. Compare it to W-2 Total Compensation, which similarly does not subtract income tax withholding.
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How to Compare 1099 vs. W-2 Take-Home Pay
The core difference is self-employment tax: as a 1099 contractor, you pay both the employee and employer halves of Social Security and Medicare tax (15.3% combined, before adjustments), while a W-2 employee only pays the employee half (7.65%), with the employer covering the rest separately.
How Self-Employment Tax Is Calculated
Net earnings are adjusted by a factor of 0.9235 (per IRS Schedule SE), then Social Security tax (12.4%) applies up to the annual wage base, and Medicare tax (2.9%) applies with no cap, plus an Additional Medicare Tax (0.9%) above certain income thresholds.
1099 vs. W-2 Calculator Formula
- Net Earnings = Gross 1099 Income × 0.9235
- Social Security Tax = MIN(Net Earnings, Wage Base) × 12.4%
- Medicare Tax = Net Earnings × 2.9%
- Additional Medicare Tax = MAX(0, Net Earnings − Threshold) × 0.9%
- Total Self-Employment Tax = Social Security + Medicare + Additional Medicare
Is 1099 or W-2 Better?
It depends on the actual dollar comparison, not a general rule — a 1099 rate that looks higher on paper can net out lower than a W-2 salary once self-employment tax, lost benefits, and unbillable time are all factored in. Run your specific numbers rather than relying on a rule of thumb.
1099 vs. W-2 Examples
$150,000 in net 1099 business income: Self-employment tax (Social Security + Medicare portions) totals approximately $21,194, before income tax is even applied.
Common 1099 vs. W-2 Comparison Mistakes
Comparing gross 1099 revenue directly to W-2 salary without subtracting self-employment tax first — they're not the same kind of number. Forgetting that half of self-employment tax is deductible when calculating income tax, which partially offsets the burden. Ignoring the value of employer-provided benefits (health insurance, retirement matching, paid time off) that a W-2 role may include and a 1099 role typically doesn't.
How to Use This Calculator
Enter your W-2 offer details (salary, benefits, paid time off) on one side, and your actual or expected 1099 numbers (revenue, expenses, self-funded costs) on the other. The calculator shows both totals side by side, plus the 1099 revenue and hourly rate you'd need to match the W-2 offer.
Formula & Methodology
W-2 total compensation = salary + bonus + employer-paid benefits (health, retirement match, other). 1099 compensation after costs = contractor revenue − business expenses − self-employment tax − self-funded health insurance/retirement/other costs. Self-employment tax is calculated using the real IRS structure: 12.4% Social Security (capped at the 2026 wage base of $184,500) + 2.9% Medicare (uncapped) + 0.9% Additional Medicare Tax above $200,000 — all applied to net earnings × 92.35%, the standard Schedule SE adjustment.
Example: $95,000 W-2 offer vs $120,000 1099 contract
W-2: $95,000 salary + $8,000 employer health + $4,000 retirement match = $107,000 total compensation. 1099: $120,000 revenue − $6,000 expenses − $9,600 health insurance − self-employment tax (≈$15,650 on $114,000 net) ≈ $88,750 compensation after costs. In this example, the W-2 offer is actually worth more once benefits and self-employment tax are accounted for.
Does not calculate federal, state, or local income tax on either side — both totals are before income tax, so this is not a take-home-pay comparison. Assumes the single-filer Additional Medicare Tax threshold ($200,000). Break-even figures use a standard approximation and do not model the Social Security wage base cap or Additional Medicare Tax threshold at very high income levels — consult a tax professional for six-figure-plus scenarios.
This calculator is for general educational estimation only and is not tax, legal, or financial advice. It does not calculate your actual tax liability. Self-employment tax figures are based on official 2026 IRS/SSA rates and thresholds, but your actual taxes depend on your complete financial situation. Consult a qualified tax professional or CPA before making employment decisions based on this comparison.
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Frequently Asked Questions
- Is 1099 compensation the same as take-home pay?
- No — this calculator subtracts business expenses, self-funded benefits, and self-employment tax, but not federal, state, or local income tax. Neither side of the comparison includes income tax.
- How is self-employment tax calculated here?
- Using the real IRS structure: 12.4% Social Security (capped at the 2026 wage base of $184,500) plus 2.9% Medicare (uncapped), applied to net earnings × 92.35% — not a flat 15.3% of gross revenue.
- What does the break-even hourly rate mean?
- It's the 1099 hourly rate that would be needed to match your W-2 total compensation, after accounting for self-funded benefits, business expenses, and self-employment tax.
- Does this include state income tax?
- No. State and local income taxes are not included in this version — results reflect federal self-employment tax only, before any income tax at any level.
- Why does the W-2 side not add extra value for paid time off?
- Paid time off is already included in your W-2 salary — you're paid whether or not you take those days. The comparison instead reflects that 1099 contractors typically have fewer paid working weeks, which is captured in your entered contractor revenue and hours.
Last updated 7/15/2026