A 1099 contract usually pays more on paper than a W-2 job for the same work, and it has to. As a contractor you pay both halves of Social Security and Medicare, cover your own expenses, and buy the benefits an employer would have provided. This calculator compares what you actually keep in each case, using 2026 federal rules, and shows the contract income that would match the salary.
Figures checked by Muhammad Ahmad against IRS: 2026 tax inflation adjustments (Rev. Proc. 2025-32), IRS: Self-employment tax and SSA: 2026 contribution and benefit base. Prices and rules change, so confirm with the official source before relying on them. How we check the math
How it works
W-2 side: salary minus employee FICA (6.2% Social Security up to the $184,500 wage base, 1.45% Medicare, plus 0.9% Additional Medicare above $200,000 single or $250,000 joint) and federal income tax on salary minus the 2026 standard deduction. The value of employer benefits is added, because a contractor would have to pay for them.
1099 side: contract income minus business expenses gives profit. Self-employment tax is 15.3% on 92.35% of profit (Social Security part capped at the wage base). Income tax uses the same 2026 brackets after the standard deduction, half of SE tax and a simplified 20% qualified business income deduction.
The break-even figure is the 1099 income at which contract take-home equals W-2 take-home plus benefits, found by trying incomes until the two match.
State income tax, the employer's side of payroll costs, and unpaid time off aren't included. A contractor who takes unpaid holidays needs a higher rate again.
A worked example
A $90,000 salary leaves $72,145 after $6,885 of FICA and $10,970 of federal income tax, or $84,145 counting $12,000 of employer benefits. A $115,000 contract with $5,000 of expenses gives $110,000 of profit; after $15,543 of self-employment tax and $9,871 of income tax, $84,587 is left. The contract comes out about $442 a year ahead, only just. The break-even contract income is about $114,400, 27% more than the salary, and that's before any unpaid time off.
Questions people ask
How much more should a 1099 contractor charge than a W-2 salary?
Often 25% to 40% more, depending on benefits, expenses and time off. Use the break-even figure here for your own numbers rather than a rule of thumb.
Why do 1099 workers pay more tax?
They pay self-employment tax, which covers both the employee and employer halves of Social Security and Medicare, 15.3% instead of 7.65%. Half of it is deductible, and business expenses and the QBI deduction reduce the gap.
Does the calculator include the QBI deduction?
Yes, a simplified version: 20% of profit after the self-employment tax deduction, capped at 20% of taxable income. High earners in some service businesses get less; check with a tax professional.
What about state income tax?
It isn't included. It applies to both options, so it rarely changes which is better, but it lowers take-home on both sides.
What benefits should I count for a W-2 job?
The employer's share of health insurance premiums, 401(k) matching, and any other paid perks you would otherwise buy. Paid time off matters too: a contractor isn't paid for holidays.