W-2 vs 1099 Calculator

• Two ways to earn income

  W-2 employees receive salary with employer payroll tax withholding. Independent contractors typically receive 1099 income and pay self-employment tax on net profit.

• Gross pay is not take-home pay

  Federal income tax, FICA or self-employment tax, business expenses, and contractor-only costs all reduce what you keep after taxes.

• Benefits change the comparison

  Employer-paid health insurance, retirement match, PTO, and other benefits can add value to a W-2 package that is not always reflected in salary alone.

• Not classification advice

  This tool compares simplified federal tax scenarios. It does not determine whether a worker should legally be classified as an employee or contractor.

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• W-2 path

  Estimates employee FICA, federal income tax, and after-tax cash pay from W-2 salary. Adds user-entered annual benefits value to total estimated W-2 value.

• 1099 path

  Subtracts business expenses from contractor gross income, then estimates self-employment tax and federal income tax on net profit. Subtracts user-entered contractor extra costs from after-tax income.

• Total value comparison

  W-2 total value equals after-tax pay plus benefits. 1099 total value equals after-tax pay after extra contractor costs. The difference is W-2 total value minus 1099 total value.

• Known exclusions

  State taxes, retirement matching beyond user-entered benefits, unemployment insurance, workers compensation, and full employment-law protections are not fully modeled.

Estimates only — not tax advice, legal advice, or financial advice. TaxChecker is not affiliated with the IRS. Consult a qualified tax professional for your situation.

Read the full TaxChecker methodology

• Business expenses

  Software, equipment, travel, home office, and other ordinary business expenses reduce net 1099 profit before tax. Enter expenses tied to your contractor work.

• Health insurance and benefits

  Contractors often purchase health coverage and fund retirement themselves. Use contractor extra costs for premiums, insurance, or other annual contractor-only spending not in business expenses.

• Administrative overhead

  Accounting, legal, invoicing, and unpaid time spent on business operations can reduce effective hourly pay even when not fully deductible.

• Self-employment tax

  Contractors generally pay both halves of Social Security and Medicare through self-employment tax on net earnings, while W-2 employees split FICA with employers.

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• What break-even means here

  Break-even contractor gross income is the 1099 gross amount where total estimated 1099 value equals total estimated W-2 value for the same inputs (benefits, expenses, and extra costs held constant).

• Expense ratio is held constant

  As gross contractor income changes, business expenses scale proportionally using the expense ratio from your entered gross income and expenses.

• Hourly break-even

  When hours per year are provided, break-even gross income is divided by hours to show an approximate hourly contractor rate that matches W-2 total value under these assumptions.

• Planning estimate only

  Break-even results may not exist if contractor value stays below W-2 value across the search range. This is a simplified federal model, not a contract negotiation recommendation.

Read the full TaxChecker methodology