US W-2 vs 1099 Calculator: Employee or Contractor Pay

Compare net take-home pay between W-2 salary and 1099 freelance rates accounting for FICA, SE Tax, and QBI deductions.

W-2 employee or 1099 contractor: comparing net pay and hourly rate

A US contractor (1099) pays the 15.3% Self-Employment Tax on 92.35% of profit, whereas a W-2 employee pays only 7.65% FICA, but the contractor deducts half of that tax, health insurance and 20% of QBI income. The tool calculates annual net pay under both statuses and the 1099 hourly rate that matches the employee's net plus the employer 401(k) match. With the default values, a $110,000 salary equals about $79.39 an hour as a contractor, 1.39 times the W-2 hourly rate ($57.29 over 1,920 hours worked, paid time off excluded).

Formulas

  • W-2: gross = salary + bonus; FICA = 6.2% up to $184,500 + 1.45%; income tax = gross × (federal rate + state rate); net = gross − FICA − income tax.
  • 1099: billable hours = (260 − unpaid days) × 8; profit = fees − expenses; SE Tax = 92.35% of profit × (12.4% up to the cap + 2.9%); QBI = 20% × (profit − ½ SE Tax − health insurance); net = fees − expenses − health − SE Tax − income tax.
  • Break-even rate = (W-2 net + 401(k) match + expenses + health) ÷ [1 − (federal + state + 15.3%) × 0.85] ÷ billable hours; it is compared with the W-2 hourly rate = salary ÷ ((260 − paid days off) × 8).
  • Winning status: 1099 net compared with W-2 net plus the 401(k) match. The health insurance subsidy is not added, since the 1099 net already deducts the premium the contractor pays.

Example with the default values

Employee: $110,000 + $5,000 bonus, 24% federal, 5% state. FICA $8,797.50, net $72,852.50, plus $11,000 of employer benefits. Contractor: $85 × 1,880 h = $159,800, $8,000 expenses, $650 of insurance a month. SE Tax $21,448.66, QBI $26,655.13, net $91,631.39, or $14,378.89 more than the employee's net plus the $4,400 401(k) match. Break-even rate: $79.39 an hour, 1.39 times the employee's $57.29 an hour. Raising the cap to $184,500 changes nothing here, as income stays below it.

Limits

  • The marginal rate is applied to all income, with no standard deduction or brackets, so income tax is overstated on both sides.
  • No 0.9% Additional Medicare Tax and no QBI limits.

Sources and dates: 2026 Social Security wage base of $184,500 (Social Security Administration, effective 01/01/2026); FICA and SE Tax rates from the Internal Revenue Code (sections 1401, 1402 and 3101); 20% QBI deduction made permanent by P.L. 119-21 of 04/07/2025 (checked 14/10/2026). An estimate, not a substitute for a tax adviser.

Frequently Asked Questions

What 1099 hourly rate matches a W-2 salary?

A common rule is 1.25 to 1.5 times the employee hourly rate. With the tool's default values, a $110,000 salary ($57.29 an hour over 1,920 hours worked, 20 paid days off excluded) needs $79.39 an hour as a contractor, 1.39 times as much. The gap comes from SE Tax, unbilled days, expenses and paying your own health insurance.

How much is the Self-Employment Tax?

15.3% on 92.35% of net profit: 12.4% Social Security up to the $184,500 wage base in 2026, then 2.9% Medicare with no cap. On $151,800 of profit that comes to $21,448.66. Half of this tax is deductible from taxable income.

What is the 20% QBI deduction?

Section 199A lets self-employed people deduct up to 20% of qualified business income; P.L. 119-21 of 04/07/2025 made it permanent. The tool applies it without the taxable-income limits or the phase-out for certain service professions above income thresholds.

Are employer-paid benefits taken into account?

Yes for the 401(k) match: the example's $4,400 is added to the employee's net to pick the winning status and work out the break-even rate. The $6,600 health insurance subsidy is not added, because the 1099 net already deducts the contractor's $7,800 premium. The 1099 lead therefore drops from $18,779 to $14,379. Applying the marginal rate with no standard deduction also skews the comparison.

Is this tool really free?

Yes, all tools on Kristools are 100% free and accessible without registration.

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