W-2 vs 1099 Calculator (2026)
At the same income, a 1099 contractor nets less than a W-2 employee because they pay the full 15.3% self-employment tax instead of splitting FICA. The employer's half is about $7,650.00 on a $100,000 salary. Contractors typically charge more to offset this and missing benefits. Compare both below.
Why do 1099 contractors pay more tax?
They pay the full 15.3% self-employment tax; W-2 employees split FICA 50/50 with their employer.
How big is the gap?
On the payroll side, the employer covers 7.65% — about $7,650.00 on a $100,000 salary.
Should a contractor charge more?
Usually yes — enough to cover the extra SE tax and the benefits an employer would provide.
Do W-2 employees get benefits too?
Often: health insurance, retirement match, and paid leave, which a 1099 rate should also account for.
What is the difference between W-2 and 1099?
A W-2 employee has an employer that withholds taxes and pays half of Social Security and Medicare. A 1099 contractor is self-employed: they handle their own taxes and pay both halves as self-employment tax.
That is why, at the same headline income, the contractor keeps less unless they raise their rate. The calculator above shows the gap.
How much more tax does a 1099 contractor pay?
| Factor | W-2 employee | 1099 contractor |
|---|---|---|
| FICA / SE tax | 7.65% (employer pays the other half) | 15.3% (pays both halves) |
| Tax withholding | Automatic each paycheck | Quarterly estimates (self-managed) |
| Deductions | Limited | Business expenses on Schedule C |
| Benefits | Often included | Self-funded |
How do you set a fair 1099 rate?
- Start from the equivalent W-2 salary.
- Add the extra 7.65% employer-side payroll tax.
- Add the value of lost benefits (health, retirement, paid leave).
- Add a margin for unpaid time and self-employment overhead.
Is it ever better to be 1099?
It can be, when expenses are high or the contract rate is well above the W-2 equivalent. Run your numbers in the 1099 tax calculator and the self-employment tax calculator.