Updated November 1, 2026 for the 2026 tax year
What a W-2 job includes that a 1099 rate doesn't
- The employer's half of payroll tax. An employer pays 7.65% of your salary on top of it. As a contractor you pay that yourself through self-employment tax.
- Benefits. Health insurance, retirement matching and paid time off can be worth thousands a year.
- Paid time off. A W-2 salary pays for 52 weeks. A contractor only earns for the weeks actually worked.
- Business costs. Contractors usually supply their own tools, software, insurance and equipment.
How the comparison works
The calculator puts both offers on the same footing. It takes 1099 gross pay, subtracts expenses and the full self-employment tax, then adds back the 7.65% a W-2 employee would have had withheld anyway. That number is compared to the W-2 salary plus benefits.
The rule of thumb
A common shortcut is that a contractor rate should be 1.3 to 1.5 times the equivalent salary's hourly rate. The break-even rate above gives you the exact number for your situation.
The other side: who decides 1099 or W-2
Whether someone is a contractor or an employee depends on how the work is controlled, not on what the paperwork says. If a company sets your hours, provides your tools and directs how the work is done, the IRS may consider you an employee.
Common questions
Is $50 an hour 1099 better than a $70,000 salary?
Often it's close. At 40 hours and 48 weeks, $50 an hour is $96,000 gross, but after self-employment tax, expenses and lost benefits the gap can shrink a lot. Enter your own numbers above.
Do 1099 contractors pay more tax?
They pay the employer's half of Social Security and Medicare, an extra 7.65% roughly, but half of SE tax is deductible and business expenses lower taxable income.
Sources: IRS guidance on self-employment tax and independent contractors vs. employees, Social Security Administration 2026 wage base.