About this calculator
The headline number on a contractor offer is misleading. A W-2 salary is matched by benefits your employer pays, and the employee half of FICA comes out pre-tax. A 1099 pays no benefits, charges you the employer half of FICA, and leaves you paying unemployment insurance and your own workers' comp coverage.
How it works
The calculator values the W-2 on three bases: take-home cash, take-home plus benefits, and the total cost to the employer. The 1099 is taxed as self-employment income on 92.35% of earnings. The difference between the two take-homes is the number that matters when comparing offers.
Frequently asked questions
Is a 1099 better than a W-2?
A 1099 pays more gross for the same work, but you lose benefits and pay roughly 7.65% more in payroll tax. Many contractors come out ahead; many employees with good benefits do not. Compare total value, not the rate.
What is self-employment tax on a 1099?
Self-employment tax is 15.3% on 92.35% of net earnings: 12.4% Social Security up to the $184,500 wage base plus 2.9% Medicare. Half of it is deductible, so the real net cost is a little under 13%.
Does a 1099 affect your ability to get a mortgage?
It can. Lenders want to see stable income, and 1099 income is treated as self-employment income that is averaged over 24 months and verified with tax returns. Two years of consistent 1099 work usually satisfies this.
What benefits do I lose as a 1099?
Employer-paid health insurance, retirement contributions and match, paid leave, and any stipend. You can sometimes offset this by setting up your own SEP-IRA or Solo 401(k), which are deductible.
Can a company require me to be a 1099 contractor?
Classification depends on how the working relationship actually behaves, not on the label. If you are controlled, work set hours, use the company's tools, and are economically dependent, a misclassification is common. The IRS has a specific test for this.
Should I charge a 1099 rate 30% higher?
A common rule of thumb. The actual break-even depends on your tax bracket, the value of the benefits you give up, and your business expenses. This calculator solves for the true number instead of guessing.