W-2 vs 1099 Take-Home Calculator
Built & reviewed by Nandu Kannan · Overtime rules cited to primary statutes
Same dollar amount, two tax treatments. Compare what you keep as a W-2 employee versus a 1099 contractor in 2026 — full self-employment tax, the half-SE deduction and QBI included.
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2026 estimate. 1099 pays the full 15.3% self-employment tax (both FICA halves) and gets the half-SE deduction + simplified 20% QBI; W-2 splits FICA with the employer. State tax applied to profit. A 1099 rate usually needs to be higher than a W-2 salary to break even, because contractors also fund their own health insurance, PTO and retirement. Not tax advice.
The real difference is benefits
Tax is only half the story. A W-2 job typically bundles employer-paid health insurance, a retirement match, paid time off and payroll-tax sharing. A 1099 rate has to cover all of that out of pocket — which is why contractors generally need a meaningfully higher headline number just to break even. Use this tool for the tax gap, then add your own benefit costs.
Frequently asked questions
How much more should a 1099 contractor charge than a W-2 salary?
A common rule of thumb is 25–50% more, because a 1099 contractor pays the full 15.3% self-employment tax (both FICA halves) and must fund their own health insurance, paid time off, retirement match and unpaid sick days. The calculator shows the pure tax difference; add a buffer on top for those self-funded benefits.
Why does 1099 pay more self-employment tax?
A W-2 employer pays half of Social Security and Medicare (7.65%) for you. As a 1099 contractor you are both employer and employee, so you pay the full 15.3% — though you get to deduct half of it, plus a simplified 20% QBI deduction on qualified business income, which this tool includes.
Is 1099 ever better than W-2?
Financially, 1099 can win when you have significant deductible business expenses, can contribute heavily to a solo 401(k)/SEP-IRA, and negotiate a high enough rate. It loses on benefits and stability. Run the numbers here, then add the cost of benefits you would have to buy yourself.
Does this include state tax?
Yes — pick your state and it applies 2026 state income tax to both scenarios. It does not include local/city taxes, your specific deductions beyond a flat business-expense field, or health-premium costs.
Related tools
Salary needed for a take-home · Bonus tax · 1099 tax calculator · Quarterly taxes · All take-home tools