Job offer vs commute
Compare two jobs after tax, mileage, parking and time on the road. See how much more you keep a year and what each extra commute hour costs.
Annual net 1099 advantage
+$7,776/yr
1099 net ($87,361) vs W-2 net + match ($79,585)
Example calculation
Yes, 1099 rate pays
At $75.00/hr across 1,880 billable hours ($141,000 gross), you net $87,361/yr after self-employment taxes, health insurance, and overhead, beating a $110,000 W-2 package by $7,776/yr. Your break-even 1099 rate is $68.84/hr.
Break-even 1099 rate
$68.84/hr
vs $52.88/hr W-2 base hourly
Break-even multiplier
1.30x
1099 markup needed over W-2
Gross 1099 revenue
$141,000/yr
1,880 billable hrs/yr
5-year net difference
+$41,284
5-yr cumulative advantage (3%/yr growth)Side-by-side breakdown
| Metric | W-2 employee | 1099 contractor |
|---|---|---|
| Gross annual compensation | $110,000 | $141,000 |
| Business overhead & self-paid health insurance | $0 (employer-covered) | -$10,800 |
| Payroll / Self-employment (FICA / SECA) tax | -$8,415 | -$18,397 |
| Section 199A QBI tax savings | $0 | +$4,598 |
| Income tax (after half-SE-tax & QBI deductions) | -$26,400 | -$24,442 |
| Employer 401(k) match & benefits | +$4,400 | $0 |
| Total annual net value | $79,585 | $87,361 |
5-year cumulative value (3%/yr growth)
How total after-tax compensation and employer benefits accumulate over 5 years:
| Year | W-2 annual net | 1099 annual net | W-2 cumulative | 1099 cumulative | 1099 net advantage |
|---|---|---|---|---|---|
| Year 1 | $79,585 | $87,361 | $79,585 | $87,361 | +$7,776 |
| Year 2 | $81,973 | $89,982 | $161,558 | $177,343 | +$15,785 |
| Year 3 | $84,432 | $92,681 | $245,989 | $270,024 | +$24,035 |
| Year 4 | $86,965 | $95,462 | $332,954 | $365,486 | +$32,532 |
| Year 5 | $89,574 | $98,326 | $422,528 | $463,811 | +$41,284 |
How this calculator works
Dividing a W-2 salary by 2,080 hours understates the hourly rate a 1099 contractor needs to break even. As an independent contractor, you do not get paid for vacations, sick days, or federal holidays, you must buy your own health insurance and replace any employer 401(k) match, and you pay both the employee and employer halves of Social Security and Medicare tax (15.3% on 92.35% of net profit up to the $176,100 Social Security cap). On the plus side, 1099 contractors deduct business expenses, deduct half of self-employment tax, and often qualify for the 20% Section 199A Qualified Business Income (QBI) deduction.
What to watch out for
Most independent contractors need a 1099 hourly rate that is 1.25x to 1.40x their equivalent W-2 hourly wage just to match their W-2 take-home pay and benefits, before adding any risk premium for unpaid gaps between contracts.
Frequently asked questions
Why do 1099 contractors pay more payroll tax than W-2 employees?
On a W-2 paycheck, your employer pays 7.65% for Social Security and Medicare and withholds 7.65% from your pay. As a 1099 contractor, the IRS considers you both employer and employee, so you pay the combined 15.3% self-employment tax on 92.35% of your net business profit up to the Social Security wage base ($176,100), plus 2.9% Medicare above that cap.
How much does the 20% QBI deduction offset self-employment tax?
Under Section 199A, eligible sole proprietors and 1099 contractors can deduct up to 20% of qualified business income (after deducting half of self-employment tax and self-employed health insurance) from federal taxable income. In a 24% marginal bracket, that reduces your effective tax rate on net profit by nearly 4 percentage points.
Why does this calculator default to 47 billable weeks instead of 52?
A standard W-2 salary pays you across all 52 weeks, including 10 paid federal holidays (2 weeks) and 15 paid vacation or sick days (3 weeks). A 1099 contractor only bills for hours actually worked, so 47 weeks (1,880 hours) is the realistic full-time benchmark.
What retirement accounts can a 1099 contractor use?
While a 1099 contractor gives up an employer 401(k) match, you can open a Solo 401(k) or SEP IRA and contribute both as employee and employer (up to 20% of net self-employment income), sheltering significantly more pre-tax income than a standard W-2 401(k) limit.
Benchmark sources and dates
Starting assumptions are example benchmarks, not binding quotes. Change any input to match your own bills or offers.
| Assumption / Input | Starting value | Source | Checked |
|---|---|---|---|
| Self-employment tax rate & wage base | 15.3% up to $176,100 | Internal Revenue Service Self-Employment Tax (Social Security and Medicare Taxes) | 2026-10-13 |
| Social Security taxable wage cap | $176,100 | Social Security Administration Contribution and Benefit Base | 2026-10-13 |
| Qualified Business Income (QBI) deduction | 20% of qualified net income | Internal Revenue Service Qualified Business Income Deduction (Section 199A) | 2026-10-13 |
| Employer health insurance & retirement benefits | $7,200/yr health, 4% 401(k) match | U.S. Bureau of Labor Statistics Employer Costs for Employee Compensation | 2026-10-13 |
| Billable weeks per year | 47 weeks/yr | U.S. Bureau of Labor Statistics National Compensation Survey Paid Leave | 2026-10-13 |