Contract vs Full-Time Calculator (1099 vs W-2)
“They offered me $75/hour — is that better than my $120k job?” This calculator answers that question properly: both halves of payroll tax, health insurance, retirement match, and the paid time off you’d be giving up. US federal figures, 2026 tax year, single filer.
Federal tax only, single filer, standard deduction, 2026 figures. State tax excluded on both sides.
How the comparison works
The W-2 side. From the salary we subtract federal income tax and the employee half of payroll taxes (7.65%), then add back the parts of compensation that arrive as benefits rather than cash: the employer 401(k) match and the health premium your employer pays. Paid time off needs no adjustment here — the salary already includes it.
The 1099 side. Gross income is rate × hours × weeks actually worked — every week off is unpaid, which is why the weeks-off input matters so much. From gross we subtract business expenses (deductible), then self-employment tax (15.3% on 92.35% of net earnings, half of it deductible), then federal income tax on what remains, then the health insurance you now buy yourself.
Break-even rate. The number at the bottom of the results is the hourly rate at which the contract exactly matches the W-2 offer’s net value, holding your other inputs constant. Negotiate from there, not from your old salary ÷ 2080.
Worked example
A $120,000 salary with a 4% match, $8,000 employer health premium and 25 paid days off has a net value around $102–105k/year. Matching it at 40 billable hours with 4 unpaid weeks off, $9,600 self-paid insurance and $3,000 of costs requires roughly $75–80/hour — about 30% above the naive $58/hour you get from dividing the salary by 2,080 hours. This is the arithmetic behind the “charge 30–50% more” rule.
What this calculator deliberately leaves out
- State income tax — excluded on both sides; it roughly cancels out in-state.
- Contractor tax optimizations — QBI deduction, Solo 401(k), S-corp election. These favor the contractor; treat our result as conservative for the 1099 side.
- Job security and upside — unquantifiable, and personal. Contracts end faster but also renegotiate faster.
Sources: IRS Topic 554 — Self-Employment Tax, IRS 2026 inflation adjustments. Data reviewed August 2026.
Frequently asked questions
How much more should a 1099 contractor make than a W-2 employee?
A widely used rule of thumb is 30–50% more in gross pay to break even, and this calculator shows why: the contractor pays both halves of Social Security and Medicare (15.3% self-employment tax versus 7.65% withheld from employees), replaces employer-paid health insurance (often $6,000–$15,000+ a year), funds their own retirement match, and receives no paid time off. A $100,000 salary with decent benefits typically requires roughly $130,000–$145,000 of 1099 income to match.
What is the biggest hidden cost of going 1099?
Usually health insurance, followed by unpaid time off. Marketplace family coverage can exceed $1,500/month without employer subsidy. And every vacation day a contractor takes is a day of income that simply doesn’t exist — 15 days off at $500/day is $7,500 of invisible cost.
Are there tax advantages to being a contractor?
Yes, and the calculator is deliberately conservative about them. Contractors deduct legitimate business expenses pre-tax, may use a home-office deduction, can shelter far more in a Solo 401(k) (up to the combined employee+employer limits), may benefit from the 20% QBI deduction on pass-through income, and at higher profits an S-corp election can trim self-employment tax. A good accountant often claws back a meaningful share of the gap this tool shows.
Does this work for countries other than the US?
The detailed tax math here is US-specific (federal, single filer). The structure of the comparison — lost benefits, lost paid time, both-halves payroll tax — applies everywhere, but use the rule-of-thumb output with local rates elsewhere. Country-specific versions are on our roadmap.
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Simplified federal estimate for planning only — not tax advice. Your filing status, state, deductions and benefits will change the outcome. Consult a CPA before deciding.Full disclaimer.