Compare the true after-tax, after-benefits value of a contractor offer vs an employee offer. See which one actually puts more money in your pocket.
Enter both offers to compare:
What contract rate equals your W-2 salary?
Choosing between a 1099 contractor role and a W-2 employee position isn't just about the gross income. The two classifications have fundamentally different tax treatments, benefit structures, and legal protections. A $100,000 W-2 salary and a $100,000 1099 contract rate are not equal — the contractor will pay roughly 15.3% in self-employment tax (both halves of Social Security and Medicare) while the employee only pays 7.65% with their employer covering the other half.
Beyond taxes, W-2 employees typically receive health insurance, retirement matches, paid time off, and unemployment protection. Contractors must provide all of these themselves. On the other hand, 1099 contractors can deduct business expenses (home office, equipment, mileage, software) and may qualify for the QBI deduction (20% of qualified business income). They also have access to higher retirement contribution limits through SEP-IRAs or Solo 401(k)s.
The key insight: a 1099 rate needs to be significantly higher than a W-2 salary — typically 20-30% — to deliver the same after-tax, after-benefits outcome. Use our calculator above to compare your specific offers.
When you work as a 1099 contractor, you're running a business. Your "employer" no longer pays: the employer half of FICA (7.65% of your wages), health insurance premiums (employers typically cover 50-80%), retirement contributions (average 3-5% match), workers' compensation insurance, unemployment insurance, paid vacation (10-15 days/year), sick days (5-10 days/year), and holidays (10-12/year). These costs typically add 25-35% on top of your base salary.
Additionally, contractors face income volatility — gaps between contracts, late payments, and the administrative burden of running a business (invoicing, bookkeeping, quarterly tax filings). These factors justify a premium hourly or annual rate compared to an equivalent W-2 role.