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Employee vs Contractor Calculator
Compare W-2 vs 1099 net pay, benefits gap, and your break-even contractor rate. Accurate, instant and free — for United States.
What these mean:
1099 contracting nets $2,487 more per year on these numbers. Break-even 1099 rate ≈ $150,381.
To match the W-2’s total value as a contractor, charge about $150,381/yr.
How W-2 vs 1099 net pay is calculated
The calculator runs two parallel tax waterfalls — one for the W-2 employee and one for the 1099 independent contractor — then solves for the contractor rate at which both net to the same amount (the break-even). All math uses integer cent arithmetic on the IRS 2026 tax year parameters.
W-2 employee net
Federal + FICA + state income tax
FICA = 7.65% employee share (SS 6.2% up to $184,500 + Medicare 1.45%)
Federal income tax uses the 2026 progressive brackets after the standard deduction. State income tax applies the modeled state schedule; unmodeled states surface an honest disclaimer instead of a wrong figure.
1099 contractor net
SE tax → deductions → QBI → brackets
SEHI = self-employed health insurance deduction (above the line)
After the standard deduction the QBI deduction (Section 199A) is the lesser of 20% of qualified business income or 20% of taxable income before QBI. Federal income tax then applies to the remaining taxable income.
QBI deduction (Section 199A)
Lesser-of rule — 2026 with $400 floor
2026 floor: at least $400 when QBI ≥ $1,000 (new rule). Phase-out above $201,775 (single) / $276,775 ceiling for specified service trades (law, health, consulting, finance).
The lesser-of rule means the QBI deduction is only valuable when your taxable income before QBI is at least as large as your net business income — which is the common case for a contractor with no large other income sources. The $400 guaranteed minimum (2026) helps very-low-income freelancers.
The break-even contractor rate
The break-even is the 1099 gross at which your after-tax, after-expense contractor net equals your W-2 net plus the benefits gap — the dollar value of the employer-paid perks you give up (health insurance, 401(k) match, paid time off).
Benefits gap
The hidden employer cost you must replace
Example: $100k / 260 × 15 days + $3,000 match + $7,885 health ≈ $16,654
A typical W-2 benefits package adds 15–20% on top of the cash salary. That is why the break-even 1099 gross for a $100,000 W-2 salary is roughly $150,000–$160,000 — not $100,000.
Break-even solve
Binary search over the 1099 waterfall
Solved by binary search (bisection) over the full 1099 tax waterfall — exact to the cent.
Because the contractor waterfall has multiple non-linear steps (SE tax, QBI lesser-of, progressive brackets), there is no closed-form solution. The calculator uses binary search on the exact engine function to converge to the break-even cent.
$100k W-2 vs $130k 1099 — Texas, single, 2026
W-2 salary $100,000; 1099 gross $130,000; Texas (no state income tax); single; $7,885 health; 3% 401k match; 15 PTO days; $3k expenses; $7,885 SEHI; $10k SEP contribution.
- 1W-2 side: Federal tax on $100k (single, 2026 standard deduction $16,100 → taxable $83,900): brackets → $13,170. FICA 7.65% = $7,650. TX state tax $0. Net = $79,180.
- 21099 SE tax: Net SE = $130k − $3k expenses = $127k. SE taxable = $127k × 0.9235 = $117,285. SS: 12.4% × $117,285 = $14,543; MC: 2.9% × $117,285 = $3,401. SE tax = $17,945.
- 31099 above-the-line deductions: Half SE tax $8,972 + SEHI $7,885 + SEP $10,000 = $26,857. AGI = $127,000 − $26,857 = $100,143.
- 4QBI deduction (lesser-of): Standard deduction $16,100 → taxable before QBI = $84,043. 20% × QBI ($127,000) = $25,400; 20% × taxable ($84,043) = $16,809. Lesser-of = $16,809 (taxable income limit binds). Taxable income = $84,043 − $16,809 = $67,234.
- 51099 federal income tax + net: Federal tax on $67,234: brackets → $9,504. Net = $130,000 − $17,945 − $9,504 − $7,885 − $10,000 − $3,000 = $81,667.
These are after-tax take-home figures
Frequently asked questions
Enough to cover the self-employment tax premium (the employer half of FICA you now pay yourself, 7.65% of net earnings up to the wage base) plus the benefits an employer would have provided — health insurance, a 401(k) match, and paid time off. On a $100,000 W-2 job with typical benefits, the break-even 1099 rate is usually in the $150,000–$160,000 range. Use the break-even output above for your exact figure.
Yes. Independent contractors filing Schedule C generally qualify for the Section 199A Qualified Business Income deduction — 20% of qualified business income, but capped at the lesser of that or 20% of taxable income. Specified service businesses (law, health, consulting, finance) lose it above the 2026 phase-out ($276,775 single / $553,500 MFJ). A new 2026 rule guarantees at least a $400 deduction when you have $1,000+ of active business income.
Self-employment tax is the 15.3% Social Security (12.4%, capped at $184,500 of net earnings in 2026) and Medicare (2.9%, uncapped) you pay on net self-employment income — both the employee and employer halves, because you are both. It is calculated on 92.35% of your net earnings, and you can deduct half of it above the line.
Take your W-2 net take-home, add the dollar value of the benefits you would lose (employer health insurance + 401(k) match + PTO), and find the 1099 gross that produces that same net after self-employment tax, federal and state income tax, the QBI deduction, and your own retirement and health-insurance costs. The calculator solves this for you with a binary search.
Employer-paid health insurance is generally not taxable income to you, and a 401(k) match grows tax-deferred — which is exactly why they are worth real money in a W-2 vs 1099 comparison. The calculator counts their full dollar value in the benefits gap rather than treating them as taxable wages.
Method, assumptions & references
Methodology: the SE tax applies to 92.35% of net self-employment earnings (IRS Schedule SE). The QBI deduction uses the lesser-of rule per §199A. Break-even is solved by binary search over the full 1099 waterfall to the nearest cent. State tax models: TX/FL/WA/NV/TN — none (modeled); CA/NY — progressive brackets; IL/PA — flat rate; OH/NJ — progressive brackets. Unmodeled states surface a disclaimer.
Estimates based on your inputs
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