1099 vs W2 Cost Calculator
Compare the full cost of a contractor vs employee — from both the employer's and worker's perspective.
Health, dental, 401k match, etc.
Default 2,080 = full-time
What This Calculator Compares
The calculator shows two perspectives: the employer's total cost of each arrangement, and the worker's estimated take-home pay under each scenario. These are rough financial estimates — actual tax impact varies significantly based on state, filing status, deductions, and retirement contributions.
Key Financial Differences
| Factor | W2 Employee | 1099 Contractor |
|---|---|---|
| Employer pays FICA | Yes — 7.65% | No |
| Worker pays FICA | Half — 7.65% | Full — 15.3% (SE tax) |
| Benefits | Employer may contribute | Worker pays own |
| Tax withholding | Employer withholds | Worker pays quarterly |
| Employer control | More control over work | Less control |
Worked Example
Comparing a $80,000 W2 salary vs a $90,000 1099 contract for similar work:
Employer cost — W2: $80,000 base + ~$6,120 FICA + benefits = $94,000+ total cost
Employer cost — 1099: $90,000 invoice = $90,000 total cost (no employer taxes)
Worker take-home — W2: After employee FICA + estimated income tax ≈ $58,000–$62,000
Worker take-home — 1099: After self-employment tax (15.3%) + income tax ≈ $57,000–$63,000 (varies widely with deductions)
These are illustrative estimates. Actual take-home depends on tax bracket, filing status, deductions, state taxes, and retirement contributions.
Frequently Asked Questions
Can I just call someone a 1099 contractor to avoid payroll taxes?
No. Worker classification is determined by the actual nature of the working relationship — not what label you use. Misclassification can result in back taxes, penalties, and legal liability. The IRS and Department of Labor both apply multi-factor tests to determine proper classification.
Who pays more in taxes overall — W2 or 1099?
1099 workers pay the full 15.3% self-employment tax themselves. W2 workers split FICA with their employer (7.65% each). However, 1099 contractors can deduct many business expenses, which can offset part of the higher SE tax — the net impact varies significantly by individual situation.
Is a higher 1099 rate always better for the worker?
Not necessarily — the contractor must fund their own benefits (health insurance, retirement), pay quarterly estimated taxes, and absorb gaps between contracts. The effective hourly rate needs to be higher than a W2 equivalent to actually be financially comparable.