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⚙ Your Details
🏥 W-2 Benefits (Employer-Provided)
💼 1099 Contractor Details
💼 W-2 Employee
Gross Salary$0
Federal Income Tax-$0
State Income Tax-$0
Employee FICA (7.65%)-$0
Net Take-Home$0
+ Health Insurance Value+$0
+ 401k Match Value+$0
+ PTO Value+$0
+ Other Benefits+$0
Total Compensation$0
💰 1099 Contractor
Gross 1099 Income$0
Business Expenses-$0
1/2 SE Tax Deduction-$0
QBI Deduction (20%)-$0
Federal Income Tax-$0
State Income Tax-$0
Self-Employment Tax (15.3%)-$0
Health Insurance-$0
Retirement Contribution-$0
Net Take-Home$0
No PTO (Opportunity Cost)-$0
Adjusted Net$0
Equivalent 1099 Rate to Match W-2
$0/hr
$0/year gross 1099 income needed
W-2 Total Comp Value
$0
1099 Gross Needed
$0
Premium Over W-2 Salary
+0%
Minimum 1099 Hourly Rate
$0/hr
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Hidden Costs of 1099
- No unemployment insurance safety net
- No workers compensation coverage
- Must provide own equipment & software
- Quarterly estimated tax payments required
- No employer-paid training or development
- Income instability between contracts
- Self-funded health, dental, and vision
- No employer FICA match (you pay both halves)
Benefits of 1099
- Higher gross earning potential
- Home office deduction (up to $1,500 simplified)
- Higher retirement contribution limits ($69K Solo 401k)
- QBI deduction reduces taxable income by 20%
- Deduct business travel, meals, equipment
- Set your own schedule and rates
- Work with multiple clients simultaneously
- Potential LLC/S-Corp tax optimization
Next Steps for Contractors
LLC vs S-Corp Calculator →
Could an S-Corp save you thousands in self-employment tax? Find out.
Self-Employment Tax Calculator →
Calculate your exact SE tax liability with deductions.
Freelance Rate Calculator →
Determine your ideal hourly or project-based rate.
HSA Calculator →
Maximize your Health Savings Account as a contractor.
Frequently Asked Questions
How much more should I charge as a 1099 contractor vs W-2?
As a general rule, your 1099 rate should be 25-40% higher than an equivalent W-2 salary to account for self-employment tax (15.3%), health insurance, no employer 401k match, no PTO, and business expenses. Use the calculator above for your exact number based on your situation.
What is self-employment tax on 1099 income?
Self-employment tax is 15.3% on the first $168,600 of net self-employment income (2026), covering both employer and employee shares of Social Security (12.4%) and Medicare (2.9%). Income above $168,600 is subject only to the 2.9% Medicare portion. There is also a 0.9% Additional Medicare Tax on income above $200,000 ($250,000 married).
What is the QBI deduction for 1099 contractors?
The Qualified Business Income (QBI) deduction allows eligible self-employed individuals to deduct up to 20% of qualified business income from their taxable income. For 2026, the deduction phases out for specified service trades at taxable income above $191,950 (single) or $383,900 (married filing jointly).
Do W-2 employees or 1099 contractors pay more in taxes?
1099 contractors generally pay more in total taxes due to self-employment tax. However, contractors can reduce their burden through business expense deductions, the QBI deduction, higher retirement contributions, and potentially forming an S-Corp to reduce SE tax.
What benefits do W-2 employees get that 1099 contractors don't?
W-2 employees typically receive employer-subsidized health insurance ($7K-$20K+ value), 401k matching (3-6% of salary), paid time off (15-25 days), unemployment insurance, workers compensation, disability insurance, and life insurance. These can add 20-40% to total compensation value.
Self-Employment Tax Calculator
Freelance Rate Calculator
Tax Calculator
LLC vs S-Corp
HSA Calculator
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Disclaimer: This calculator provides estimates for educational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex and individual situations vary. Consult a qualified tax professional or CPA for advice specific to your situation. 2026 tax brackets and limits are estimates based on projected inflation adjustments. Part of AI How To Invest.
