1099 vs W-2 Calculator
↻ Updated 2026Compare your after-tax pay as a W-2 employee versus a 1099 contractor at the same headline pay for 2026 — factoring in FICA, self-employment tax and federal income tax.
Educational calculators — always consult a licensed professional before making financial decisions.
Runs entirely in your browser — nothing you enter is sent to us.How this works
How to read the 1099 vs W-2 gap
The gap is the price of the missing employer. At $100,000 the same headline pay leaves you $4,925 worse off as a contractor — and the whole of that gap is FICA that an employer would otherwise have paid. It is not a penalty for freelancing; it is the employer's half of a tax, moved onto your side of the ledger.
How the same pay is taxed as an employee and as a contractor
Two parallel calculations against one number. The headline pay is held constant — the question is what each side keeps.
The W-2 path is straightforward: FICA off the top at 7.65%, income tax on pay minus the standard deduction. The 1099 path differs in three ways that partly cancel. Self-employment tax is double the rate, but charged on 92.35% of pay rather than all of it, and half of it comes off income before the brackets apply. The gap is what survives that cancellation.
W-2 employee: FICA = 6.2% × min(pay, $184,500) + 1.45% × pay taxable = pay − standard deduction income tax = brackets applied to taxable take-home = pay − FICA − income tax 1099 contractor: net earnings = pay × 0.9235 SE tax = 12.4% × min(net earnings, $184,500) + 2.9% × net earnings taxable = pay − (SE tax ÷ 2) − standard deduction income tax = brackets applied to taxable take-home = pay − SE tax − income tax gap = W-2 take-home − 1099 take-home
- pay
- The same headline number offered either way — a $100,000 salary against a $100,000 contract — the comparison only means something if the number is identical
- FICA
- The employee half of Social Security and Medicare — 6.2% + 1.45%; the employer pays a matching 7.65% you never see
- SE tax
- Both halves of the same two taxes, paid by the contractor — 12.4% + 2.9% on 92.35% of pay (IRS Schedule SE)
- SE tax ÷ 2
- The deductible half, subtracted from income before the brackets — an above-the-line adjustment — the contractor's taxable income is lower than the employee's on identical pay
- standard deduction
- $16,100 single, $32,200 married filing jointly for 2026 — both sides claim it (Rev. Proc. 2025-32)
- gap
- How much more the employee keeps — at identical headline pay, before any benefit or expense is considered
The two adjustments matter more than they look. Naively a contractor pays an extra 7.65% — $7,650 on $100,000. The actual gap is $4,925, because the 92.35% factor keeps $7,650 of pay out of the SE base and the deductible half cuts taxable income by $7,065, which at a 22% marginal rate is worth $1,554 of income tax. Roughly a third of the extra payroll tax comes back through those two channels.
What the calculator holds equal is exactly what real offers don't. A W-2 salary usually arrives with health insurance, a 401(k) match, paid leave, unemployment insurance and workers' compensation attached; a contract rate arrives with none of them. That's why contractor rates are typically quoted well above the equivalent salary — the gap here is the tax floor of that premium, not the whole of it. The freelance hourly rate calculator works the problem from the rate side.
Worked examples
Example: $100,000 either way, single filer
The calculator's defaults. The same $100,000 offered as a salary and as a contract, standard deduction on both sides, no business expenses.
| Headline payidentical both ways | $100,000 |
| W-2 — employee FICA6.2% + 1.45% of $100,000 | − $7,650 |
| W-2 — federal income taxon $83,900 taxable | − $13,170 |
| W-2 take-home79% of gross | $79,180 |
| 1099 — net earnings92.35% of $100,000 | $92,350 |
| 1099 — self-employment tax15.3% of $92,350 | − $14,130 |
| 1099 — federal income taxon $76,835 — lower, thanks to the $7,065 deduction | − $11,616 |
| 1099 take-home74% of gross | $74,255 |
| Take-home gapmore as a W-2 employee | $4,925 |
$4,925, or 4.9% of pay — not the 7.65% the doubled FICA rate suggests. The contractor pays $6,480 more in payroll tax but $1,554 less in income tax, because the deductible half of SE tax pulled taxable income down to $76,835. To match $79,180 of employee take-home, the contract would need to be worth about $107,500 before a single dollar of health insurance is bought.
Example: $200,000 either way
Drag pay to $200,000. Both sides cross into the 24% bracket and the Social Security wage base starts to bite — differently for each.
| W-2 — employee FICASocial Security capped at $184,500 of wages | − $14,339 |
| W-2 — federal income taxon $183,900 taxable | − $36,734 |
| W-2 take-home74% of gross | $148,927 |
| 1099 — net earnings92.35% of $200,000 — just over the wage base | $184,700 |
| 1099 — self-employment tax$22,878 Social Security, capped, plus $5,356 Medicare | − $28,234 |
| 1099 — federal income taxon $169,783 | − $33,346 |
| 1099 take-home69% of gross | $138,420 |
| Take-home gapmore than double the gap at $100,000 | $10,507 |
Pay doubled and the gap more than doubled, from $4,925 to $10,507. The contractor's Social Security has just capped out at $22,878 — one more dollar of pay and the marginal SE rate collapses from 14.13% to 2.68%. Past roughly $200,000, the gap stops growing much: both sides are above the wage base, and the only remaining difference is the Medicare half. The worst income at which to be a contractor rather than an employee is right about here.
Frequently asked questions
How much more should a 1099 contractor charge than a W-2 salary?
The tax floor is calculable and it's smaller than most rules of thumb suggest. On this calculator's defaults, matching $79,180 of W-2 take-home requires about $107,500 of contract income against a $100,000 salary — a 7.5% premium, not 30%.
The rest of any premium is not tax; it's the benefits the salary was carrying. Employer health insurance, a 401(k) match, paid time off, unemployment insurance and workers' compensation all vanish with the W-2, and none of them appear on this page. Pulling in the other direction, business expenses reduce a contractor's profit before both income tax and SE tax, which no employee deduction can match. This page publishes the tax gap; what premium covers the rest depends on what your benefits were worth.
Can my employer pay me as a 1099 instead of W-2?
Not by preference. Classification follows how the work actually functions, not what either party would rather file. The IRS weighs behavioural control (who decides how, when and where the work is done), financial control (who supplies the tools, whether you can profit or lose, whether you're free to work for others) and the type of relationship (benefits, permanence, whether the work is core to the business).
The stakes are the gap on this page. A worker moved from W-2 to 1099 at unchanged pay loses $4,925 at $100,000 — the employer's FICA half, transferred — plus benefits and unemployment eligibility. A worker who believes they've been misclassified can file Form SS-8 and ask the IRS to determine the status; Form 8919 lets them pay only the employee half of FICA while it's contested.
Is it better to be 1099 or W-2?
On tax alone, at identical headline pay, W-2 wins on every setting of this calculator — $4,925 at $100,000, $10,507 at $200,000. The employer's FICA half is real money and the contractor simply doesn't get it.
What that framing omits is that identical headline pay is rare, and that the two sides have different levers. A contractor deducts business expenses against both income tax and SE tax, can open a solo 401(k) with a much higher combined ceiling than an employee's $24,500 elective limit, and may qualify for the §199A deduction on business income — none of which this tool models. An employee gets the FICA half, benefits, and a withholding system that files itself. The comparison here is deliberately narrow: same pay, same deduction, tax only.
What business expenses can a 1099 contractor deduct?
Ordinary and necessary costs of running the business — the statutory test under IRC §162. In practice that covers a home office meeting the exclusive-use test, business mileage, the business share of phone and internet, equipment, professional services, business insurance, advertising, and training that maintains or improves skills in your current trade.
The reason it matters more for a contractor than an employee is arithmetic, not generosity. Expenses reduce Schedule C profit, which is the base for both income tax and SE tax — so on $100,000 of profit a $1,000 deduction saves $141 of SE tax and $204 of income tax, $346 in total. An employee's unreimbursed work expenses are not deductible at all. This calculator applies zero expenses to the 1099 side, which makes its gap the worst case for a contractor: a real Schedule C with meaningful expenses closes some of it, and the specific mileage and home-office rates aren't in our 2026 data module, so this page won't quote them.
What this comparison deliberately holds equal
The narrowness is the design: same pay, same filing status, same deduction, tax only. Almost every real decision turns on something in this list.
- No business expenses — The 1099 side is taxed on the full headline pay with nothing deducted. Real contractors deduct against Schedule C profit before both income tax and SE tax, so the gap shown here is the ceiling on the tax disadvantage, not the expectation.
- No benefits, either side — Health insurance, retirement matching, paid leave, unemployment insurance and workers' compensation are worth a substantial fraction of a salary and are worth nothing on a contract. None of it is in the gap. For most people this is larger than the tax difference it sits next to.
- No QBI deduction — The §199A qualified business income deduction can remove up to a fifth of qualifying business income from a contractor's taxable income. It applies to the 1099 side only, and the calculator omits it — which overstates the gap for anyone eligible.
- The surtax threshold ignores a second income — Both columns apply the additional Medicare threshold for your filing status, but they test it against this one income figure. In reality Form 8959 tests your combined wages and self-employment earnings — so a household with a second earner, or a contractor who also holds a W-2 job, crosses the threshold earlier than either column here shows.
- Retirement contribution room differs and isn't shown — A contractor's solo 401(k) accepts employee deferrals plus an employer share, against a much higher combined ceiling than the $24,500 elective limit alone. Neither side's contributions appear here, and the asymmetry favours the contractor.
Rates, brackets and limits here are checked against primary sources. If a number still looks off, email support@realmoneyiq.com and we'll review and fix it.
RealMoneyIQ provides free educational calculators, not financial, tax, investment or legal advice. Results are estimates based on the assumptions you enter and publicly published rates; your actual outcome will differ. Always confirm decisions with a licensed professional who knows your full situation.