🇺🇸 US Federal · Updated June 2026
1099 vs W-2 Calculator —
Compare Take-Home Pay
See exactly how much you keep as a 1099 contractor vs a W-2 employee. Find your break-even rate, model the QBI deduction, and see what employer benefits are really worth in dollars. 2026 federal tax rates.
⚠️ Updated June 2026: 1099-NEC reporting threshold raised to $2,000 for 2026 (One Big Beautiful Bill Act, July 2025) — up from $600. 1099-K threshold reverted to $20,000 + 200 transactions. QBI deduction (20%) made permanent — no longer expires.
15.3%
Self-employment tax (vs 7.65% employee FICA)
+7.65%
Extra tax vs W-2 (you pay the employer half)
20%
QBI deduction — Section 199A, permanent 2026
$16,100
Standard deduction single · $32,200 married
$
USD
Include QBI deduction (20% · Section 199A)
1099 side only · eligible freelancers under $200K single / $400K MFJ
Add business expenses (1099 side)
Home office, equipment, software — reduces 1099 taxable income
W-2 Employee
- Gross income $80,000
- FICA (7.65%) −$6,120
- Federal income tax −$8,770
Net take-home / year
$65,110
Effective rate: 18.6%
1099 Contractor
- Gross income $80,000
- Self-employment tax −$11,303
-
Federal income tax
after SE & QBI deductions −$5,344
Net take-home / year
$63,353
Effective rate: 20.8%
Why does W-2 net more at the same gross? As a 1099 contractor you pay both halves of FICA (15.3% SE tax vs 7.65% employee FICA). The QBI deduction reduces federal income tax, but doesn't fully offset the SE tax gap at this income level. Use the Break-Even Rate tab to find your minimum 1099 rate.
Enter your W-2 salary and benefits package. We'll find the minimum 1099 gross you need to charge to match your take-home — including taxes and the benefits you'd lose.
$
USD/yr
Employer benefits (enter what your employer pays / provides):
$
/mo
%
days
$
USD/yr
Tax break-even — minimum 1099 gross to match W-2 take-home
$93,800
$48.85/hr · based on 1,920 billable hours/year (48 weeks × 40 hrs)
Your W-2 net take-home
$65,110/yr
Premium over W-2 salary
Extra needed to cover SE tax gap
+$13,800
Your employer benefits are worth this much per year — you'll self-fund these as 1099:
| Health insurance (employer $500/mo) | $6,000/yr |
| 401(k) match (3% of salary) | $2,400/yr |
| PTO value (15 days) | $4,615/yr |
| Total benefits value | $13,015/yr |
True break-even gross (taxes + benefits): $106,800 — to both match your W-2 take-home AND cover self-funded benefits. As a 1099 freelancer, you can deduct 100% of health insurance premiums, reducing actual gross needed slightly. Rule of thumb: charge at least 1.33× your W-2 salary.
$
USD/yr
$
USD/yr
Include QBI deduction (Section 199A)
20% of qualified business income — eligible if gross under $200K single / $400K MFJ
Gross 1099 income
$100,000
− Business expensesDeductible from gross income
$0
= Net self-employment income
$100,000
− Self-employment tax (15.3% × 92.35%)12.4% SS on first $184,500 + 2.9% Medicare (unlimited)
−$14,130
+ SE tax deduction (50% of SE tax)Deducted from AGI — employer-half is pre-tax for W-2, so you get it back too
+$7,065
− QBI deduction (20% · Section 199A)Permanently extended by One Big Beautiful Bill Act, July 2025
−$14,591 from taxable
− Standard deduction (2026)$16,100 single · $32,200 married filing jointly
−$16,100
= Federal taxable income
$62,244
− Federal income tax
−$9,053
SE Tax
$14,130
Eff. rate 23.2%
Net take-home
$76,817
After all taxes
Federal Income Tax
$9,053
On taxable income
Quarterly estimated taxes: Set aside approximately 25% of gross income — roughly $5,796/quarter. Due dates: April 15 · June 16 · September 15 · January 15. IRS penalty applies if you underpay. State taxes are additional — not included here.
How 1099 vs W-2 Taxes Work
The fundamental difference is payroll tax responsibility. As a W-2 employee, your employer pays 7.65% FICA on your behalf — a cost on top of your salary, invisible on your pay stub. As a 1099 contractor, you pay the full 15.3% self-employment tax because there is no employer. That 7.65% gap is the starting point for any 1099 premium calculation.
W-2: Employer Pays Half
Employer covers 7.65% FICA, you pay 7.65%. Total 15.3% is shared — but the employer's half comes from funds that could otherwise be your wages.
1099: Full SE Tax (15.3%)
You pay both halves. 12.4% Social Security on first $184,500 + 2.9% Medicare unlimited. Applied to 92.35% of net income, not the full amount.
SE Tax Deduction (50%)
Deduct half of SE tax from AGI before calculating federal income tax — this mirrors how W-2 employers deduct their FICA share. Partially offsets the SE burden.
QBI Deduction — 20%, Permanent
Eligible freelancers deduct 20% of qualified business income from taxable income. Made permanent by the One Big Beautiful Bill Act, July 4, 2025.
After the SE deduction and QBI deduction, the true extra tax cost of 1099 status at moderate incomes is roughly 7–10% of equivalent gross — not the commonly cited 15.3%. The QBI deduction alone offsets a major portion of the SE tax gap for most freelancers under $200K single / $400K married.
2026 legislation update: The One Big Beautiful Bill Act (signed July 4, 2025) made Section 199A permanent — no longer expiring at end of 2025 as originally scheduled under TCJA. It also raised the 1099-NEC threshold from $600 to $2,000 for 2026. You will not receive a form from clients paying under $2,000, but must still report all income on Schedule C.
The Benefits Gap — Where 1099 Gets Expensive
The tax math often surprises freelancers — the net take-home difference is smaller than expected. Where 1099 contracts genuinely cost more is benefits. A mid-market W-2 package includes $12,000–$26,000 per year in employer-funded benefits that self-employed workers must buy out of pocket.
| Benefit | W-2 (employer covers) | 1099 (you pay) | Annual gap |
|---|---|---|---|
| Health insurance (individual) | $400–$1,100/mo employer contribution | Full premium ~$400–$700/mo | $4,800–$13,200 |
| 401(k) employer match | 3–6% of salary (typical range) | No match — contributions only | $2,400–$7,200 at $80K salary |
| PTO (15 paid days) | Paid — no income loss | Every day off = unbilled revenue | $4,615/yr at $80K |
| Dental + vision | Employer partially covers | Separate individual plan | $600–$1,200/yr |
| Typical total | Benefits package value for a $80K–$100K W-2 role | $12,000–$26,000/yr | |
Self-employed health insurance deduction: As a 1099 contractor you can deduct 100% of health insurance premiums from gross income (Schedule 1, Form 1040). At $700/mo ($8,400/yr) in premiums, this saves roughly $1,800–$2,000 in federal tax depending on your bracket — partially closing the benefits gap. Enter it as a business expense in the calculator above for an accurate net.
Frequently Asked Questions
How much more should I charge as a 1099 contractor vs my W-2 salary?
At minimum 25–40% more to cover the SE tax gap (~7.65%) plus lost employer benefits ($12,000–$26,000 per year). The exact premium depends on your income, filing status, and benefits package — use the Break-Even Rate tab above for a precise number. The 2026 QBI deduction significantly reduces the tax portion of the gap at moderate incomes, so the true multiplier is often lower than the widely repeated "40% rule."
Do I pay double taxes as a 1099 contractor?
No. You pay the full 15.3% SE tax — both halves of FICA — but W-2 employers also pay 7.65% on top of your salary. That employer share is funded out of your total compensation budget, so the economic burden is similar either way. The real extra cost as 1099 is roughly 7–10% of income after the SE deduction (50% of SE tax reduces AGI) and QBI deduction (20% for eligible freelancers).
What is the self-employment tax rate in 2026?
15.3% — 12.4% for Social Security on the first $184,500 of net SE income, plus 2.9% for Medicare with no income cap. SE tax is calculated on 92.35% of net self-employment income (not the full amount), and 50% of SE tax is deductible from adjusted gross income, reducing your federal income tax bill.
What is the QBI deduction and do I qualify as a freelancer?
Section 199A lets eligible self-employed individuals deduct 20% of qualified business income from taxable income. Most freelancers qualify if taxable income is under $200,000 (single) or $400,000 (married filing jointly) in 2026. The One Big Beautiful Bill Act (signed July 4, 2025) made this deduction permanent — no longer expiring as originally scheduled. Some specified service businesses (certain financial, legal, and consulting fields) face additional restrictions above the income threshold.
Do I need to pay quarterly estimated taxes as a 1099 contractor?
Yes, if you expect to owe $1,000 or more in taxes for the year. With no employer withholding, the IRS requires quarterly payments. 2026 due dates: April 15, June 16, September 15, and January 15, 2027. Set aside 25–30% of gross income throughout the year, then pay quarterly. Use the 1099 Tax Estimator tab above to calculate your specific amount. The IRS charges an underpayment penalty if you miss or underpay.
Will I receive a 1099-NEC if I earn less than $2,000 from a client in 2026?
No — businesses only file Form 1099-NEC for payments of $2,000 or more in 2026 (raised from $600 by the One Big Beautiful Bill Act). However, you must still report all self-employment income on your tax return regardless of whether you receive a 1099-NEC. The threshold applies only to the payer's reporting obligation, not your obligation to pay tax. The $2,000 amount will be adjusted for inflation starting in 2027.
Sources & how we calculate
This calculator compares the same gross pay as a 1099 contractor versus a W-2 employee. On the 1099 side it applies the full 15.3% self-employment tax, the 50%-of-SE-tax deduction, and the 20% QBI deduction; on the W-2 side it applies the employee half of FICA. It then adds the dollar value of employer benefits and solves for your 1099 break-even rate. 2026 federal figures, computed in your browser.
Official sources: Contractor vs Employee · Self-Employment Tax · Self-Employed Tax Center · Form 1099-NEC
Estimate only, not tax advice. Worker classification has legal tests beyond pay (see the IRS link above). Verify your situation with a qualified tax professional.
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Disclaimer: This calculator is for educational purposes only and does not constitute tax or financial advice. Figures use 2026 US federal tax rates (IRS Rev. Proc. 2025-32) and the Tax Cuts and Jobs Act as amended by the One Big Beautiful Bill Act (July 2025). State and local taxes are not included. Individual circumstances vary significantly — consult a qualified tax professional for advice specific to your situation.