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2026 tax year

1099 vs W2 Calculator

Compare net take-home pay between a W2 job offer and a 1099 contract — factoring self-employment tax, health insurance, and business deductions.

W2 Employee Offer

$
$

Your share, pre-tax via Section 125

$

1099 Contractor Offer

$

2,080 = 40 hrs × 52 wks

$

You pay 100% on the individual market

$

Equipment, software, home office…

$

Shared

Net take-home difference
+$11,867
1099 nets more per year
W2 net
$70,435
on $90,000
1099 net
$82,301
on $120,000
W2 breakdown
Federal income tax$11,018
Social Security (6.2%)$5,468
Medicare (1.45%)$1,279
State$0
Health premium$1,800
1099 breakdown
Federal income tax$9,167
Self-employment tax (15.3%)$16,532
State$0
Health insurance$9,000
Business expenses$3,000
QBI deduction (est. 20%)$19,947
Break-even 1099 rate
$51/hr
to match W2 net at 2,000 hrs/yr
W2 effective tax rate: 19.74% · 1099 effective tax rate: 21.42%

Estimate only. Results show your annualized federal, state and FICA tax liability divided by pay periods — not the exact per-paycheck withholding your employer computes from your W-4 (IRS Publication 15-T). Actual paychecks may differ. Not tax advice.

1099 vs W2: the tax difference that changes everything

The single biggest tax difference between a W2 employee and a 1099 independent contractor is who pays FICA — Social Security and Medicare. As a W2 employee, your employer withholds 7.65% from your paycheck and pays a matching 7.65% behind the scenes. As a 1099 contractor, you pay both halves yourself: 15.3% self-employment tax on 92.35% of your net earnings.

Self-employment tax breakdown

  • 12.4% Social Security on the first $176,100 of net SE income (2025 wage base)
  • 2.9% Medicare on all net SE income (no cap)
  • +0.9% Additional Medicare above $200K single / $250K MFJ
  • Half of SE tax is deductible from your AGI — a partial offset

What 1099 contractors can deduct that W2 employees cannot

  • Health insurance premiums — 100% above-the-line deduction (up to net SE profit)
  • Business expenses — home office, equipment, software, mileage, professional development
  • Retirement contributions — SEP-IRA (25% of net SE income up to $70,000) or Solo 401(k) ($70,000 total for 2025)
  • QBI deduction — up to 20% of qualified business income (phases out for high-earning SSTBs)

The hidden costs of going 1099

A $60/hr contract sounds like $124,800/yr — but before comparing to a W2 salary, subtract: employer-side FICA (~$7,600), self-paid health insurance ($6,000–$15,000), no paid time off (2–4 weeks = $5,000–$10,000 opportunity cost), no 401(k) match ($3,000–$6,000), and no employer-paid disability, life, or dental. A common rule of thumb: 1099 rates need to be 25–40% higher than the W2 hourly equivalent to break even on total compensation.

When 1099 wins

Independent contracting typically nets more when: your billable rate is 40%+ above the W2 hourly equivalent, you have significant deductible business expenses, you can max a Solo 401(k) or SEP-IRA, you qualify for the full 20% QBI deduction, and you don't need employer-sponsored benefits (spouse's plan covers health). Contractors also gain flexibility, multiple income streams, and the ability to write off legitimate business costs.

When W2 wins

W2 employment usually wins on total compensation when: the salary includes a strong 401(k) match, health insurance premiums are heavily subsidized, PTO and holidays are generous, and the role includes equity, bonuses, or professional development budgets. W2 employees also get unemployment insurance, workers' compensation, and predictable withholding without quarterly estimated tax payments.

Estimates for planning only. This calculator uses 2025 federal brackets, standard deductions, and FICA thresholds. QBI is modeled as a flat 20% and does not simulate SSTB phaseouts. Consult a CPA before making a job-change decision.