Why the same number isn't the same money
If someone offers you "$80,000," it matters enormously whether that's a W-2 salary or a 1099 contract. At the same gross figure, the two leave you with different take-home pay — mainly because of who pays the employer half of payroll tax. This calculator runs both side by side so you can compare an offer, set a fair contract rate, or decide between an employee role and contracting.
The core difference: payroll tax
Social Security and Medicare tax totals 15.3% of earnings. As a W-2 employee, you pay half (7.65%) and your employer pays the other half. As a 1099 contractor, you're both employer and employee, so you pay the full 15.3% yourself as self-employment tax. At the same gross, that's the biggest reason the contractor takes home less before any other factors.
What the comparison leaves out
This is a tax-only comparison at the same gross. It doesn't count benefits, which often tip the real-world math toward W-2 work: employer health insurance, a 401(k) match, paid time off, unemployment insurance, and workers' comp all have real value an employee receives on top of salary. A contractor must buy those themselves out of take-home pay.
How much more should a contractor charge?
Because of the extra self-employment tax plus the benefits you forgo, a common rule of thumb is that a contractor should charge roughly 25–50% more than the equivalent salary to truly come out even. Use this calculator to see the tax gap precisely for your income, then add a margin for the benefits you'll be replacing yourself.
When 1099 can still come out ahead
The tax gap isn't the whole story. A contractor who keeps expenses high, maxes a SEP-IRA or Solo 401(k), and bills several clients can end up with a lower effective tax rate and more flexibility than a salaried employee — while writing off a home office and equipment a W-2 worker cannot. Contracting also lets you raise rates, take on multiple clients, and control your schedule. The right answer depends on how much you value benefits and stability versus deductions and independence — this calculator gives you the hard tax number so the rest of the decision is an informed one.
Next steps
If you're contracting, estimate what you'll actually keep with the 1099 take-home calculator, plan your payments with the quarterly estimated tax calculator, and read W-2 and 1099 forms explained to understand exactly how each is reported.