W2 vs 1099 Calculator

As a rule of thumb, a 1099 rate should be about 1.25 to 1.5 times the equivalent W-2 hourly wage to break even. The premium covers the extra 7.65% of self-employment tax (you pay both halves of FICA), the loss of employer benefits — health insurance, a 401(k) match and paid time off, which together are roughly 30% of total compensation — and self-funded overhead. The exact multiplier depends on how generous the W-2 benefits are and your state taxes; the calculator above computes your precise break-even rate instead of a guess.

Neither is universally better — it depends on the numbers and what you value. W-2 gives stability, withheld taxes, and employer-paid benefits (the calculator counts the 401(k) match and health-insurance value as real money). 1099 usually pays a higher headline rate and unlocks deductions a W-2 employee can't take — business expenses, the 20% QBI deduction, a solo 401(k), and the self-employed health-insurance deduction — but you owe the full 15.3% self-employment tax, buy your own insurance, get no paid time off, and pay quarterly estimates. Run both offers above to see which one actually leaves you with more.

Find the 1099 rate whose after-tax, after-benefits value equals the W-2 offer's total value — that's your break-even rate, shown at the top of the calculator. A quick shortcut is to take the W-2 hourly equivalent (salary ÷ 2,080 hours) and multiply by about 1.25–1.5, but that ignores your specific benefits, deductions and state tax. The tool does the full calculation, including the lost 401(k) match and health insurance, so you can negotiate a contract rate that genuinely matches the job you'd be leaving.

Corp-to-Corp means you bill the client through your own business entity — usually an LLC taxed as an S-corporation — rather than as an individual contractor (1099) or employee (W-2). The advantage is self-employment-tax savings: you pay yourself a reasonable salary (which owes payroll tax) and take the rest of the profit as distributions, which are not subject to the 15.3% self-employment tax. Turn on the S-corp / C2C column in the advanced options to see the potential savings, but remember it adds payroll, accounting and compliance costs and the IRS requires the salary to be reasonable, so model it with a CPA.

Plan to set aside roughly 25–30% of your net income for federal taxes (self-employment tax plus income tax), and more if your state has an income tax. Because no one withholds for you, the IRS expects quarterly estimated payments via Form 1040-ES, due in April, June, September and January; underpaying triggers penalties. The calculator shows your total tax burden under the 1099 column so you know exactly how much to reserve.

Yes — that's the upside of 1099. You can deduct legitimate business expenses (equipment, software, home office, mileage, professional fees), which reduce both income tax and self-employment tax. You may take the 20% Qualified Business Income (QBI) deduction, contribute far more to retirement through a solo 401(k) than a typical employee 401(k) allows, and deduct 100% of your health-insurance premiums above the line. These can substantially narrow — or even reverse — the gap created by the extra self-employment tax, which is why the calculator lets you enter them.