1099 vs W-2 Break-Even Calculator
Compare contractor (1099) vs employee (W-2) compensation. Find out what 1099 rate equals a W-2 salary after accounting for taxes and benefits.
📅 Tax Year:
Compare 1099 vs W-2
$
$
Health insurance, 401k match, etc.
$
How It Works
As a 1099 contractor, you pay more taxes than a W-2 employee:
- Self-Employment Tax: 15.3% vs 7.65% (you pay both halves)
- No Benefits: Pay for health insurance, retirement, etc.
- Business Expenses: Equipment, software, office costs
Rule of Thumb
A common guideline is that 1099 rate should be 25-40% higher than W-2 equivalent to break even. This calculator provides a more precise estimate.
Examples
Example: $100k W-2 with $15k benefits
Total W-2 value: ~$115,000
Break-even 1099 rate: ~$135,000-$145,000 depending on
expenses and tax situation.
Frequently Asked Questions
Why should 1099 pay be higher?
As a 1099, you pay full SE tax (15.3% vs 7.65%), buy your own
benefits, handle your own taxes, and have no paid time off. Higher rates compensate for
this.
What benefits should I value?
Health insurance ($5-15k), 401k match (often 3-6% of salary), paid
time off (calculate daily rate × PTO days), and other perks.
Can I deduct expenses as 1099?
Yes! Business expenses reduce your taxable income. This includes
home office, equipment, software, travel, and professional services.
Is the "30% more" rule accurate?
It's a rough starting point. The actual break-even depends on your
tax bracket, benefits value, and expenses. Use this calculator for a more precise estimate.
What about retirement contributions?
As 1099, you can contribute to a Solo 401k or SEP-IRA with higher
limits than traditional 401k. This is an advantage, but requires self-discipline.
Are there non-financial considerations?
Absolutely. W-2 offers stability, less admin work, and potential
career advancement. 1099 offers flexibility, variety, and higher earning potential. Consider
both.