The core difference
A W-2 employee has 7.65% FICA withheld and the employer pays a matching 7.65% behind the scenes. A 1099 contractor pays the full 15.3% self-employment tax themselves, plus loses paid leave, health contributions and retirement match.
What the calculator shows
At the same gross pay, the contractor nets less — typically 7–12% less before benefits are counted, and 20–30% less once health insurance and leave are valued. The break-even rate tells you what a contractor must charge to match the W-2 outcome.
What the numbers do not capture
- Employer health cover: often 6,000–12,000/year of value
- 401(k) match: commonly 3–5% of salary
- Paid leave: 15–25 days is 6–10% of annual value
- Flexibility, autonomy and client diversification (the contractor's upside)
Deciding
If the contract rate is below the break-even figure, the flexibility is being paid for out of your pocket. Above it, contracting is financially rational — provided you actually set aside tax and buy insurance.
Frequently Asked Questions
How much more should a 1099 rate be than a W-2 rate?
Typically 25–40% more to match total compensation including benefits.
Can I be 1099 and still get benefits?
Not from the client; you buy your own or use a spouse's plan.
Is 1099 always worse financially?
No — above the break-even rate it is better, and expenses become deductible.
Assumptions & disclaimer
Results are estimates for planning. Fee schedules, tax brackets and deduction limits change; confirm current figures with the marketplace, the IRS or a qualified accountant before making decisions. Nothing here is financial, tax or legal advice.
Privacy & Your Data
BizCalcTool runs entirely in your browser. The figures you enter are never uploaded, stored or shared — there is no backend to send them to.