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W-2 vs 1099 Cost Calculator
Compare W-2 employee total compensation vs 1099 contractor take-home pay. Includes self-employment tax, benefits, PTO, and retirement. Free calculator for job offer decisions.
Enter the minimum numbers needed to get a result.
Updated live as you type.
Planning estimate only. It does not include taxes, overhead allocation, depreciation, discounts, or other business-specific adjustments.
A W-2 vs 1099 comparison calculates the true after-tax and after-benefit compensation difference between being a traditional employee (W-2) and an independent contractor (1099), factoring in self-employment tax, payroll taxes, benefits, and PTO.
Formula and example
W-2 take-home = Salary + Benefits − Payroll taxes (FICA) − Income tax; 1099 take-home = Gross − SE tax (15.3% on 92.35%) − Income tax
W-2 $80K salary + $11.2K benefits − $11.3K payroll taxes = $79.9K take-home. 1099 $75/hr × 40hrs × 48weeks = $144K gross − $20.3K SE tax − $31.7K income tax = $92K take-home. Difference: +$12.1K (15% more) for 1099.
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Methodology & assumptions
Last updated: 2026-06-16Calculation method
Compares total W-2 compensation (salary + employer-paid health insurance + 401(k) match + PTO value + other benefits) after FICA payroll taxes and income tax against 1099 contractor gross income after self-employment tax (15.3% on 92.35% of net earnings) and income tax. PTO value is calculated as daily rate × days off.
Data sources
Uses the numbers you enter and standard small-business finance formulas. Benchmark comparisons use HustleFin industry benchmark pages where available.
Limitations
Assumes equal hours worked in both scenarios. Does not include state-specific disability insurance (SDI), workers' comp costs, or the administrative burden of self-employment (accounting, legal). Benefits are estimated — actual employer contributions vary. Not tax advice.
Input definitions
- W-2 annual salary: Gross annual salary as a W-2 employee.
- Health insurance (employer-paid): Annual employer contribution to health insurance.
- 401(k) match: Annual employer 401(k) matching contribution.
- Paid time off (days): Paid vacation and sick days per year.
- Other benefits: Annual value of other benefits: life insurance, disability, training, etc.
- Hours worked per week: Average weekly hours as a W-2 employee.
- 1099 hourly rate: Hourly rate you would charge as a 1099 contractor.
- 1099 hours per week: Billable hours per week as a contractor.
- 1099 weeks worked: Weeks per year you expect to have paid work (after holidays, gaps).
- Income tax rate: Effective income tax rate (federal + state).
Frequently asked questions
How much more should I charge as a 1099 contractor?+
A common rule is 30-50% above your W-2 equivalent hourly rate to cover self-employment tax (15.3%), health insurance ($5K-$15K/year), retirement, PTO, and the risk of gaps between projects. For an $80K salary ($38.46/hr), aim for $50-$60/hr minimum.
What is self-employment tax and how is it calculated?+
Self-employment tax is 15.3% of 92.35% of your net self-employment income, covering both Social Security (12.4%) and Medicare (2.9%). W-2 employees split this with their employer (7.65% each), but 1099 contractors pay the full amount themselves.
Do 1099 contractors get benefits?+
No. 1099 contractors do not receive employer-provided health insurance, 401(k) matching, paid time off, or other benefits. You must purchase your own health insurance (marketplace or private), fund your own retirement (SEP IRA or Solo 401(k)), and you don't get paid when you don't work.
When does W-2 make more sense than 1099?+
W-2 is often better when: (1) your 1099 rate premium is less than 25% above the W-2 hourly rate, (2) you have high health insurance needs, (3) you want predictable income, (4) you're early in your career and value training/mentorship. Use this calculator to compare the numbers side by side.
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