A 1099 rate and a W-2 salary of the same number are not the same offer, and treating them as equal is one of the most common ways new freelancers undercharge. As a contractor you pay both halves of Social Security and Medicare instead of splitting it with an employer, and you’re covering your own health insurance and retirement contributions instead of getting them included. This calculator puts real numbers on that gap.
| W-2 | 1099 | |
|---|---|---|
| Gross annual pay | $0 | $0 |
| Payroll / self-employment tax | $0 | $0 |
| Employer benefits value | $0 | $0 |
| Effective annual value | $0 | $0 |
Why the same number isn’t the same deal
A W-2 employer pays half of your Social Security and Medicare tax on your behalf — you only see 7.65% come out of your paycheck, not the full 15.3%. As a 1099 contractor, that other half doesn’t disappear, it just becomes your problem, calculated the same way as self-employment tax works out.
Then there’s everything an employer typically bundles in beyond the paycheck: health insurance premiums, a 401(k) match, paid holidays and sick days. None of that shows up in a 1099 rate unless you specifically price it in, which is exactly what the “benefits you’d lose” field in this calculator is for — a rough placeholder for what those things would actually cost you to replace on your own.
If the numbers show a gap, that’s the amount worth negotiating into your 1099 rate before accepting a contract offer that was pitched as “the same as the salaried role.” For help setting that rate in the first place, see the freelance hourly rate calculator.
Should my 1099 rate just be my old salary divided by hours worked?
No. That ignores both the extra half of payroll tax you now pay yourself and any benefits your employer used to cover. Most contractors need a meaningfully higher headline rate than an equivalent salary to end up in the same place financially.
Does this calculator include federal and state income tax?
No. Income tax applies to both W-2 wages and 1099 income and depends on your deductions and total income, so it doesn’t change the comparison between the two. This tool isolates the parts that actually differ: payroll/self-employment tax and benefits.
What counts as a fair value for lost benefits?
Check what your health insurance premium, any 401(k) match percentage, and your paid time off would cost to replace out of pocket. Even a rough estimate is more accurate than assuming those benefits are worth nothing.
This calculator uses 2026 federal payroll and self-employment tax rates and covers payroll tax and benefits only, not income tax, state tax, or business expenses. It’s for general comparison, not tax advice.