SB SunnyBill

1099 vs W-2 True Wage Calculator

Compare a freelance contract rate to a salaried job on a real, after-tax basis. Unlike most calculators, this one accounts for self-employment tax, employer benefits, the QBI deduction, and your billable hours - and tells you the exact hourly rate you'd need to charge as a 1099 to match a W-2 offer. Figures are for US tax year 2026.

How the true-wage comparison works

A salary and a contract rate aren't comparable until you normalize for what each one hides. This tool computes the full economic value of both sides and compares them like-for-like:

  • W-2 total value = take-home pay (salary minus employee FICA, federal tax, and state tax) plus the value of employer-paid benefits (health insurance and 401(k) match), because a contractor must fund those out of pocket.
  • 1099 after-tax value = net profit (gross income minus business expenses) minus self-employment tax, federal income tax, and state income tax - reduced by the half-SE-tax, self-employed health insurance, retirement, and QBI deductions.
  • Break-even rate = the 1099 gross income whose after-tax value equals the W-2 total value, divided by your billable hours per year.

The 2026 tax logic behind the numbers

  • Self-employment tax: 15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net profit; the Social Security portion caps at $184,500 of earnings, with an extra 0.9% Medicare above $200,000 (single) / $250,000 (joint).
  • Standard deduction (2026): $16,100 single, $32,200 married filing jointly, $24,150 head of household.
  • Federal income tax: the 2026 marginal brackets (10% to 37%) for your filing status.
  • QBI deduction: up to 20% of qualified business income, with the service-business phase-out applied above the 2026 thresholds.
  • Deductions a contractor gets: half of SE tax, self-employed health insurance premiums, and retirement contributions all reduce taxable income.

Why a 1099 rate has to be higher

The single biggest reason is the employer "burden." A W-2 employee pays 7.65% in payroll tax; the employer quietly pays the other 7.65% plus unemployment insurance. A 1099 contractor pays both halves. Add the cost of buying your own health insurance, funding 100% of your own retirement (with no match), and the fact that time off is unpaid, and a contract rate often needs to be 25-50% above the equivalent salaried hourly rate just to break even.

Ready to bill a client?

Create a professional invoice in seconds - free, no signup, no watermark.

Create an invoice

More freelancer tools

Invoice Generator

Create and download a professional invoice in seconds.
Quotation Generator

Share a clean price quote or estimate with clients.
Invoice Due Date Calculator

Work out due dates from Net 7/15/30/45/60 terms.
Late Fee Calculator

Estimate a late fee for overdue invoices.
Payment Reminder Generator

Write a polite, firm, or final payment reminder.