Contract vs Salary Calculator 1099 vs W-2
Weighing a contract rate against a salary offer? This compares them apples-to-apples — after self-employment tax, benefits, and the perks a salary hides — and shows the rate you'd need to break even.
✏️ These numbers were filled in from a shared link — change anything to make it your own.
Why a contract rate has to beat the salary
A salary quietly bundles things a contractor pays for out of pocket:
- The employer's half of payroll tax (7.65%). As 1099 you pay both halves — self-employment tax.
- Health insurance — employer-subsidized on W-2, full price on your own.
- The 401(k) match — free money you forfeit as a contractor.
- Paid time off — a salary pays you for vacation weeks; a contract only pays for hours worked (that's why the weeks-per-year field matters).
Add it up and a contract usually needs to pay 25–50% more than the equivalent hourly wage just to break even. The upside: above that line, contracting can pull well ahead — plus deductions and retirement options a W-2 can't touch.
Estimate using 2026 federal figures; ignores state tax, credits, and the QBI deduction. Not tax advice.
Frequently asked questions
Is a 1099 contract better than a W-2 salary?
It depends on the numbers. A 1099 contract has to pay for what a salary includes for free: the employer half of payroll tax (7.65%), health insurance, a 401(k) match, and paid time off. As a rule of thumb a contract rate needs to be noticeably higher than the equivalent salary just to break even — this calculator shows exactly where the line is for your offer.
How much higher should a 1099 rate be than a salary?
Often 1.25x–1.5x the equivalent hourly wage. On a $100k salary (~$48/hour), the break-even contract rate is frequently $60–70/hour once you add self-employment tax, benefits you now buy yourself, and unpaid time off. Use the break-even number above for your specific situation.
What does the calculator account for?
For the W-2 side: employee payroll tax, 2026 federal income tax, and the employer 401(k) match (free money). For the 1099 side: gross contract income, business expenses, self-employment tax, the health insurance you now buy yourself, and federal income tax. It compares the cash value of each.
What is the break-even contract rate?
It is the hourly rate at which the 1099 contract leaves you with the same money as the W-2 salary offer, after all taxes and benefits. Charge above it and the contract wins; below it, the salary wins.
Is this tax advice?
No. It is a planning estimate using 2026 federal figures and simplifying assumptions (it ignores state tax, credits, and the QBI deduction). Confirm your specific situation with a CPA.