Why a $100 hourly contract rate is not a $100 salary rate
Employees pay 7.65% of wages toward Social Security and Medicare, and the employer pays the other 7.65%. Contractors pay the full 15.3% on 92.35% of their net earnings. On top of that, employers often provide health insurance, retirement matching, paid time off and equipment, which contractors must buy themselves.
This calculator puts both options on the same footing. For the W-2 side it applies employee payroll taxes, the 2026 standard deduction and federal brackets. For the 1099 side it subtracts your business expenses, applies self-employment tax and federal income tax, and subtracts the value of the benefits you would need to replace.
Reading the results
The headline number is the 1099 revenue needed to match the W-2 offer. If an employer offers $80,000 with $10,000 of benefits, you may need to bill noticeably more than $80,000 as a contractor to take home the same amount. The premium percentage shows how much more.
State income tax is entered as a flat percentage and applied to both sides, so it affects the comparison only slightly. Federal calculations assume you file as single, head of household or married filing jointly with only this income.
Other factors that numbers do not capture
Contract work usually means irregular income, unpaid gaps between clients, and the chance of losing a client with little notice. It can also bring freedom to choose projects and to deduct more of your costs. Classification also matters legally. The IRS looks at behavioral control, financial control and the nature of the relationship, so a role that is really employment should not be labeled 1099.
Why a 1099 rate must be higher than a W-2 salary
A W-2 employer pays half of Social Security and Medicare and often provides health insurance, paid time off and retirement matching. As a 1099 contractor you pay the full 15.3% self-employment tax and buy those benefits yourself. The calculator converts benefits to dollars and finds the 1099 pay that matches your W-2 take-home.
Some costs are partly offset: you can deduct half of the self-employment tax and business expenses, and many contractors can deduct self-employed health insurance premiums. The calculator models the tax effects but not every personal situation.