US 1099 vs W-2 Calculator
Compares the take home pay of the same gross income earned as a 1099 contractor with the same amount earned as a W-2 employee.
Recent
Formula
How the calculation works
The 1099 net deducts the full self employment tax, which covers both the employee and employer share of social security and Medicare.
The W-2 net deducts only the employee share of payroll tax, because the employer pays the other half on your behalf.
On 80,000 dollars at these rates the contractor keeps 53,360 dollars against 59,480 dollars for the employee, a gap of 6,120 dollars.
Common mistakes
- Ignoring that a contractor also loses paid leave and health cover makes the 1099 figure look better than it really is.
- Using the same net rate for both, instead of the separate self employment and payroll rates, hides the whole point of the comparison.
When to use it
- Use it before choosing between a contract role and a salaried role to see the real gap in take home pay.
- Use it to work out the higher contract rate you would need to match an employee offer after the extra self employment tax.
Worked example
On 80,000 dollars with 15.3 percent self employment tax, 7.65 percent payroll tax and 18 percent income tax the 1099 net is 53,360 dollars and the W-2 net is 59,480 dollars.
Common questions
Why is the self employment tax higher than the payroll tax?
A contractor pays both the employee and the employer halves of social security and Medicare, while an employee pays only the employee half because the employer covers the rest.
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