Contractor (1099) vs Employee (W-2) Calculator
Compare a W-2 salary plus benefits against a 1099 contractor rate, accounting for self-employment tax and self-purchased insurance.
Result
- W-2 total comp (pay + benefits)$119,000.00
- 1099 gross$156,000.00
- Extra self-employment tax (~7.65%)− $11,934.00
- Self-purchased insurance− $12,000.00
- 1099 net (after extra tax + insurance)$132,066.00
- Difference (1099 − W-2)+$13,066.00
- Break-even 1099 rate to match W-2$68.20/hr
Step-by-step
- W-2 total compensation = $50.00×2,080 + benefits $15,000.00 = $119,000.00.
- 1099 net = gross $156,000.00 − extra SE tax $11,934.00 − insurance $12,000.00 = $132,066.00.
- To match the W-2 package, the contractor rate must be about $68.20/hr.
How to use this calculator
- Enter the W-2 hourly rate and the annual value of employer benefits.
- Enter billable hours per year (full-time ≈ 2,080).
- Enter the proposed 1099 rate and your self-purchased insurance cost.
- Read which option nets more and the break-even contractor rate.
About this calculator
Comparing a W-2 employee offer with a 1099 contractor rate is not as simple as comparing hourly numbers, because a contractor shoulders costs an employer normally covers. This calculator builds an apples-to-apples comparison. On the W-2 side it adds the value of employer benefits — health insurance, retirement matching, paid time off — to base pay for total compensation. On the 1099 side it starts from the gross contract income, then subtracts the extra ~7.65% self-employment tax (contractors pay both halves of Social Security and Medicare, 15.3%, versus an employee’s 7.65%) and the cost of insurance and benefits they must buy themselves. The result shows which arrangement nets more and, usefully, the break-even contractor rate that would match the W-2 package — typically well above the W-2 hourly rate, since the contractor must self-fund taxes and benefits.
How it works — the formula
W-2 total = hourly × hours + benefits
1099 net = rate × hours − (rate×hours × 7.65% extra SE tax) − insurance
Break-even 1099 rate = (W-2 total + insurance) ÷ (hours × (1 − 7.65%))The comparison loads the W-2 with benefits and the 1099 with the extra employer-share tax and self-bought insurance to compare net positions.
Worked examples
- Inputs:
- w2Hourly=50, benefits=15000, hours=2080, rate1099=75, insurance=12000
- Output:
- W-2 $119k; 1099 net ~$132,066
- Inputs:
- same
- Output:
- ≈ $68/hr to match
- Inputs:
- w2Hourly=60, benefits=20000, hours=2080, rate1099=80, insurance=15000
- Output:
- compare net positions
Limitations
- Approximates the extra SE tax as 7.65% of gross (ignores wage base & deductibility).
- Excludes QBI deduction, business expenses, and unemployment/PTO nuances.
- Directional comparison, not a tax filing.
Simplified estimate; consult a tax professional for your situation.