1099 vs W-2 Income Calculator
Deciding between 1099 contractor and W-2 employee status involves more than comparing headline dollar amounts. A 1099 contractor pays the full 15.3% self-employment tax (covering both employer and employee FICA shares) but can deduct half of SE tax and legitimate business expenses. A W-2 employee pays only 7.65% FICA but typically receives employer-funded benefits. This calculator estimates net income for both scenarios side by side, using the same federal tax bracket schedule, so you can make a fair comparison. Enter your gross income for each scenario and your key deductions.
1099 vs W-2 comparison formula
W-2 net = salary - FICA(7.65%) - federal income tax(salary - std deduction)
1099 net = gross - expenses - SE tax - federal income tax(net SE - SE deduction - std deduction)
SE tax = (gross - expenses) * 0.9235 * 0.153
SE deduction = SE tax * 0.5
Federal income tax uses the 2025 progressive bracket schedule. The SE deduction reduces the 1099 taxable income. Both scenarios use the standard deduction for simplicity.
Key differences: 1099 vs W-2
- A 1099 contractor pays 15.3% SE tax; a W-2 employee pays 7.65% (employer pays the other 7.65%).
- 1099 contractors can deduct business expenses and the SE tax deduction (half of SE tax).
- W-2 employees may receive employer-funded health insurance, retirement matches, and paid leave not included here.
- 1099 contractors must make quarterly estimated tax payments to avoid underpayment penalties.
- The true comparison should include the value of employer benefits, which may be worth $10,000-$30,000 per year for a full-time W-2 position.
1099 vs W-2 income: frequently asked questions
Why does a 1099 contractor need a higher gross rate than a W-2 employee?
A 1099 contractor pays the full 15.3% SE tax (both employee and employer FICA shares), while a W-2 employee pays only 7.65%. The contractor also receives no employer-funded benefits. To net the same take-home, a contractor typically needs a gross rate 20-30% higher.
Can 1099 contractors deduct business expenses?
Yes. Independent contractors can deduct ordinary and necessary business expenses on Schedule C, including home office, equipment, professional services, and mileage. This calculator allows you to enter business expenses that reduce net self-employment income before SE tax is applied.
Do 1099 contractors get employer benefits?
No. 1099 contractors are responsible for their own health insurance, retirement contributions, paid time off, and other benefits that W-2 employers typically fund. The value of these benefits should be considered when comparing compensation packages.
How does SE tax deduction affect a contractor's income tax?
Self-employed individuals can deduct half of their SE tax as an above-the-line adjustment to income on Form 1040, reducing their taxable income and therefore their federal income tax. This calculator applies that deduction.
What is the break-even 1099 rate compared to a W-2 salary?
As a rough rule, the equivalent 1099 rate is the W-2 salary divided by 0.9235 (to account for SE tax base) plus the value of employer benefits. For a $70,000 W-2 salary with $10,000 in employer benefits, the break-even 1099 rate is approximately $87,000-$95,000.
Official sources
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.