W2 vs 1099 calculator
Fill in your W2 package and the contractor assumptions. The calculator estimates an equivalent contractor rate and compares it with the actual 1099 hourly rate you are considering.
W2 employee package
1099 contractor assumptions
How the estimate works
A contractor rate needs to cover more than salary. It usually needs to absorb unpaid time, self-paid insurance, business expenses, tax differences, and income volatility.
| Component | W2 employee | 1099 contractor |
|---|---|---|
| Pay structure | Salary and payroll withholding | Hourly or project revenue paid before many costs |
| Health insurance | Often partly employer-paid | Usually self-paid or privately arranged |
| PTO and holidays | Paid time away from work | Usually unpaid unless built into the rate |
| Payroll tax impact | Employer and employee portions are split for Social Security and Medicare | Self-employment tax can create a larger payroll-tax burden, subject to rules and limits |
| Business costs | Often employer-provided | Equipment, software, insurance, accounting and admin may be contractor costs |
| Risk | Potentially more stable employment | Possible gaps, non-billable time and contract renewal risk |
When a higher 1099 rate may still lose
If you bill only part of the year, the hourly rate must be much higher to replace a full-year salary.
Health insurance, disability insurance, liability coverage, retirement savings and equipment can absorb a large part of contractor revenue.
Prospecting, invoicing, bookkeeping, compliance, training and downtime may not be billable.
If the company controls how work is done, worker classification can become a legal and payroll issue. Verify classification separately.
FAQ
What 1099 hourly rate equals a W2 salary?
There is no single multiplier. A useful estimate should account for salary, bonus, employer-paid benefits, billable hours, unpaid weeks, self-paid insurance, business expenses and tax buffer. This calculator solves for the contractor hourly rate needed to match the W2 package under your assumptions.
Why does the calculator ask for billable hours?
Contractors may work more hours than they can bill. Admin work, prospecting, invoicing, training and contract gaps reduce the number of paid hours that carry the whole year.
Is the extra tax buffer exact?
No. It is a planning input. Actual federal, state, local, payroll and self-employment tax effects depend on income, deductions, entity setup, location and other facts. Use a conservative buffer and verify with a tax professional.
Should I choose 1099 if the adjusted value is higher?
Not automatically. Consider payment reliability, contract length, legal classification, benefits, insurance, career path, manager quality, marketability, income volatility and your own risk tolerance.