The same gross pay lands differently in the bank depending on whether it arrives as a W-2 salary or a 1099 contract — because an employer covers half of an employee’s Social Security and Medicare tax, while a contractor pays the full self-employment tax alone.
How it works
This runs the identical gross figure through this site’s take-home-pay calculator for the W-2 side, and its self-employment-tax calculator for the 1099 side — including the real federal-tax benefit of deducting half the self-employment tax — then compares the two net results directly.
What this comparison leaves out
It’s a tax-only comparison. It doesn’t price in what a W-2 role’s benefits — health insurance, an employer retirement match, paid leave — would cost a contractor to replace out of pocket. A 1099 rate usually needs to be meaningfully higher than an equivalent salary to actually come out ahead once those are accounted for.
How to use this calculator
- Enter the gross pay being compared and a filing status.
- Enter any business expenses that would reduce 1099 net profit.
Frequently asked questions
Why does the contractor pay more tax on identical gross pay?
An employee’s Social Security and Medicare tax is split with their employer; a contractor is both the “employee” and the “employer” for tax purposes and pays the full combined rate alone.
Does deducting half the self-employment tax fully offset the difference?
No — it reduces the federal income tax bill, but only by a fraction of the extra self-employment tax paid, so a net gap generally remains.
How much higher should a 1099 rate be to match a W-2 salary?
Beyond the tax gap this calculator shows, it should also cover benefits the employer would otherwise provide — commonly cited rules of thumb suggest 20–30% higher, though it depends heavily on the specific benefits being replaced.
