How the 1099 vs W-2 calculator compares a salary and a contract
An employee and a contractor doing the same work pay income tax the same way, but not Social Security and Medicare. An employee pays 6.2% Social Security tax on wages up to $184,500 in 2026 and 1.45% Medicare tax on all wages, and the employer pays the same again. A contractor pays both halves as self-employment tax: 15.3% of 92.35% of net profit, with half of it deductible from income. Both pay the 0.9% Additional Medicare Tax on earnings above $200,000 ($250,000 on a joint return).
The contractor also pays for things an employer usually covers, entered as business expenses, and gives up the employer's benefits. Many contractors can take the qualified business income deduction, which an employee can't. The calculator puts all of it on one line for each role:
- \text{FICA}
- The employee's 7.65% Social Security and Medicare tax, plus any Additional Medicare Tax
- \text{SE tax}
- Self-employment tax: both halves of Social Security and Medicare on 92.35% of profit
- \text{benefits}
- What the employer's benefits are worth to you, which you enter
The 1099 rate to match is the smallest contract income, to the cent, whose 1099 total equals the W-2 total, divided by the hours you expect to bill. Federal and state income tax use the same 2026 brackets and state tables as the 1099 tax calculator.
Worked example: a $100,000 salary against $65 an hour
A single filer in Texas, which has no state income tax, is weighing a $100,000 job with benefits worth $15,000 a year against a contract at $65.00 an hour for 1,800 billable hours, with $5,000 of business expenses.
| W-2 employee | 1099 contractor | |
|---|---|---|
| Pay | $100,000.00 | $117,000.00 |
| Business expenses | $0.00 | -$5,000.00 |
| Social Security and Medicare | -$7,650.00 | -$15,825.10 |
| Federal income tax | -$13,170.00 | -$10,197.79 |
| Take-home pay | $79,180.00 | $85,977.11 |
| Benefits | $15,000.00 | $0.00 |
| Total | $94,180.00 | $85,977.11 |
The contract pays $17,000.00 more before tax, but self-employment tax of $15,825.10 is nearly double the employee's $7,650.00 of FICA, and the benefits are gone. The QBI deduction narrows the gap on income tax. Overall the contract comes out behind by $8,202.89. To match the job, the contract would have to bring in $128,800.36, or $71.56 an hour over 1,800 hours, against $48.08 an hour for the salary spread over a 2,080-hour year.
State tax moves the answer too. In California, the same comparison needs $72.83 an hour, because state income tax also applies to the extra contract income needed to match.
The 1099 rate to match a salary
A common shortcut is to multiply the salary's hourly rate by some factor. The calculation shows why no single factor works: the gap depends on the salary, because Social Security tax stops at the wage base, and on the benefits, the expenses and the hours you can bill. Here is the rate to match at four salaries, for a single filer in Texas with benefits worth 15% of the salary, $5,000 of expenses and 1,800 billable hours:
| Salary | Salary per hour (2,080 h) | Contract income to match | 1099 rate to match (1,800 h) | Ratio |
|---|---|---|---|---|
| $60,000 | $28.85 | $79,850.42 | $44.36 | 1.54× |
| $100,000 | $48.08 | $128,800.36 | $71.56 | 1.49× |
| $150,000 | $72.12 | $189,923.65 | $105.51 | 1.46× |
| $200,000 | $96.15 | $247,407.28 | $137.45 | 1.43× |
Billable hours matter as much as the rate. Time spent finding work, invoicing and on holidays isn't billed, so billable hours are fewer than the hours you work. Enter the hours you realistically expect, and use the second scenario to see how the rate to match changes if you bill fewer.
Employee or contractor: who decides
Whether you are an employee or an independent contractor isn't a choice of paperwork. The IRS looks at the whole relationship and the degree of control and independence, grouped into three kinds of evidence: behavioral (does the company control what you do and how you do it?), financial (does it control the business side, such as how you are paid, whether expenses are reimbursed and who provides the tools?), and the type of relationship (written contracts, employee-type benefits, and whether the work is ongoing and a key part of the business). No single factor decides it. When it is unclear, the worker or the business can ask the IRS to decide with Form SS-8.
As a contractor you also pay your tax yourself during the year: the 1099 tax calculator works out the quarterly estimated payments and the safe harbor, and parking the money in a high-yield savings account until each due date earns interest on it.
The bottom line
A contract has to pay noticeably more than a salary to leave you as well off. In the example, a $100,000 job with $15,000 of benefits is matched by $71.56 an hour over 1,800 billable hours, or 49% more than the salary's hourly equivalent.
Put your own salary, benefits, hours and expenses into the 1099 vs W-2 calculator before you quote a rate or accept an offer, and choose your state, since state income tax applies to the whole contract income.
Frequently asked questions
What 1099 rate do I need to match a salary?
The 1099 rate to match a salary is the contract income that leaves you with the same take-home pay plus benefits, divided by the hours you can bill. For a $100,000 salary with $15,000 of benefits, single in Texas with $5,000 of expenses, that is $128,800.36 a year, or $71.56 an hour over 1,800 billable hours.
How do I compare contractor vs employee take-home pay?
For contractor vs employee take-home pay, subtract FICA, federal income tax and state income tax from the salary; from the contract income, subtract business expenses, self-employment tax and income tax, remembering half of self-employment tax and often the QBI deduction reduce income tax. Then add the value of the employee's benefits to the salary side before comparing.
What is the difference between self-employment tax vs FICA?
They fund the same Social Security and Medicare programs. With self-employment tax vs FICA, the employee pays 7.65% of wages and the employer pays another 7.65%; a self-employed person pays both halves, 15.3%, on 92.35% of net profit, and deducts half of it from income. Social Security tax stops at $184,500 of earnings in 2026 either way.
How do I put a value on employee benefits?
Count what the employer pays that you would otherwise pay yourself: the employer's share of health insurance premiums, retirement plan matching, and paid holidays and vacation you couldn't bill as a contractor. The value of employee benefits differs a lot between employers, so use your own offer letter or benefits statement rather than a rule of thumb.
What is an equivalent hourly rate?
An equivalent hourly rate is a salary or contract income expressed per hour, so the two can be compared. A salary is usually spread over 2,080 hours (40 hours for 52 weeks); a contract rate should be judged against the hours you can actually bill, which are fewer once time off and unpaid work are left out.
Do contractors get the QBI deduction?
Many do. The qualified business income deduction lets self-employed people deduct up to 20% of their business profit from federal taxable income, subject to limits at higher incomes, especially for service businesses. Employees can't claim it on wages. The calculator includes it by default; switch it off to see the comparison without it.
Sources and further reading
- Topic no. 751, Social Security and Medicare withholding rates (opens in a new tab), Internal Revenue Service
- Independent contractor (self-employed) or employee? (opens in a new tab), Internal Revenue Service
- Self-employment tax (Social Security and Medicare taxes) (opens in a new tab), Internal Revenue Service
- IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill (opens in a new tab), Internal Revenue Service
- Qualified business income deduction (opens in a new tab), Internal Revenue Service
- Estimated taxes (opens in a new tab), Internal Revenue Service
- Contribution and benefit base (opens in a new tab), Social Security Administration
- 2026 State Income Tax Rates and Brackets (opens in a new tab), Tax Foundation
Related calculators
- 1099 Tax CalculatorTaking the contract? Work out the self-employment tax, your state's tax and the quarterly payments.
- High-Yield Savings CalculatorFreelancing means setting tax aside yourself. Earn interest on it until each payment is due.
- S Corp Tax Savings CalculatorGoing out on your own? See when an S corp election would cut the self-employment tax.