Compare 1099 contractor income to W-2 employee salary. Factor in self-employment tax, insurance, benefits, and PTO to find the equivalent rate.
A $100,000 salary is worth far more than a $100,000 1099 contract. As a W-2 employee, your employer pays half your FICA taxes, provides health insurance, matches 401(k) contributions, and gives you paid time off. As a 1099 contractor, you cover all of these yourself.
This calculator converts between 1099 and W-2 compensation to reveal the true equivalent. A $100K W-2 salary is equivalent to roughly $130,000–$150,000 in 1099 income, depending on benefits value and state taxes.
Whether you're evaluating a switch from employment to contracting, comparing a contract rate to a salary offer, or negotiating a 1099 rate, this tool ensures you're making an apples-to-apples comparison.
Integrating this calculation into regular planning habits ensures that work priorities reflect actual data about where time and energy produce the greatest results each week. Precise measurement of this value supports better personal and professional planning, helping you make informed decisions about how to prioritize tasks and manage competing demands.
Comparing 1099 and W-2 income requires accounting for self-employment tax, health insurance, retirement, and PTO. This calculator converts between the two so you can make informed career and compensation decisions. Precise quantification supports meaningful goal-setting and accountability, ensuring that improvement efforts are focused on areas with the greatest potential impact on output.
W2 Total Comp = Salary + Benefits + (Employer FICA at 7.65%) 1099 Equivalent = W2 Total Comp / (1 − SE Tax Rate × 0.9235) + Insurance Cost Equivalent Hourly = 1099 Equivalent / 2,080
Result: $138,000 equivalent 1099 income
W-2 total value: $90,000 salary + $15,000 benefits + $6,885 employer FICA = $111,885 total. To net $90K + cover $15K insurance + pay 14.13% SE tax: need ~$138,000 in 1099 income. That's a $66.35/hr 1099 rate to match a $43.27/hr W-2 job—a 53% premium.
Beyond SE tax of 14.13%, 1099 contractors must cover: health insurance ($5K–15K), dental/vision ($500–1,500), retirement contributions ($5K–20K), PTO equivalent ($3K–6K), disability insurance ($1K–3K), professional development ($1K–3K), and business expenses ($2K–5K). Total: $17K–53K annually.
Set aside 25–35% of every payment for estimated quarterly taxes (due April 15, June 15, Sept 15, Jan 15). Deduct business expenses aggressively (home office, equipment, software, travel). Maximize retirement contributions to reduce taxable income.
Before going 1099: build 6 months of expenses in savings, secure health insurance, establish a tax payment system, create a business entity (LLC or S-Corp), and line up initial clients. The freedom of 1099 work is real, but so are the financial responsibilities.
Typically 30–50% higher. A $40/hr W-2 position should be $52–60/hr as a 1099 contractor to account for self-employment tax (15.3%), health insurance ($5K–15K), retirement ($2K–5K), PTO equivalent ($3K–6K), and business expenses.
SE tax is the combined employer and employee portions of FICA (Social Security 12.4% + Medicare 2.9% = 15.3%). As a W-2 employee, your employer pays half (7.65%). As 1099, you pay the full 15.3% on 92.35% of net self-employment income (effective rate: 14.13%).
Yes. You can deduct the employer-equivalent portion (7.65%) of SE tax from your adjusted gross income on your personal tax return. This reduces your income tax but not the SE tax itself. It's an above-the-line deduction available to all self-employed filers.
Individual market health insurance costs $400–1,200/month ($5K–15K/year) depending on plan, age, and location. However, self-employed individuals can deduct 100% of premiums from income tax (not SE tax). This is a significant deduction that reduces the gap.
1099 is better if you can command a significant rate premium, value flexibility, and are disciplined about taxes and benefits. W-2 is better for stability, employer-paid benefits, and career growth. Many professionals alternate between both over their careers.
Open a Solo 401(k) or SEP-IRA. Solo 401(k) allows up to $23,500 employee contribution (2025) plus 25% employer contribution of net SE income. SEP-IRA allows 25% of net SE income up to $69,000. Both reduce taxable income significantly.