Why your 1099 hourly rate must be higher than W2

On a W2, your employer pays 7.65% in FICA taxes on your behalf (Social Security + Medicare) — you never see this money but it's part of your total compensation. They also typically provide health insurance, paid time off, and equipment. As a 1099 contractor, you pay both sides of FICA (15.3%), buy your own health insurance, take unpaid 'vacations', and buy your own tools. To match the total value of a $100,000 W2 salary, you need roughly $125,000–$135,000 in 1099 income.

Who pays Medicare tax on a 1099 contract?

You do — both sides. Employee Medicare tax is 1.45% and employer Medicare is also 1.45%. On a 1099, you pay both: 2.9% total. Add Social Security (12.4% total), and self-employment tax is 15.3% on your net earnings. You can deduct half of this SE tax from your income taxes (it reduces your adjusted gross income), but you still pay the full 15.3% initially.

Should I take the W2 job or the 1099 contract?

If the 1099 rate is more than 30% higher than the W2 salary for the same role, the 1099 may win financially. Below that, the W2 benefits (health insurance, employer FICA match, PTO, job security) typically make up the difference. Non-financial factors matter too: W2 provides unemployment insurance eligibility, easier loan qualification, and no quarterly tax filing burden.

Does a 1099 contractor get unemployment benefits?

Generally no. Independent contractors are not employees and cannot claim state unemployment insurance. This is a hidden cost of 1099 work: if the contract ends suddenly, you have no safety net. Factor this risk into your rate negotiation by building a 3–6 month emergency fund.

W2 vs 1099 Contractor Calculator

W2 vs 1099 calculator for developers, designers, and freelancers. See why your 1099 hourly rate needs to be 20–30% higher than your W2 equivalent to break even.

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W2 Annual Salary ($)

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Frequently asked questions

W2 vs 1099 Calculator — Find Your Equivalent Freelance Rate

A recruiter offers you $90/hour on a 1099 contract or $75/hour as a W2 employee. Which is better? It's not as simple as comparing the numbers. The W2 rate comes with employer FICA contributions, health benefits, paid time off, and unemployment protection — all of which you must cover yourself on a 1099. This calculator reveals the hidden value of W2 employment and shows the minimum 1099 rate you'd need to match it.

Employer FICA match revealed

See the 7.65% your employer pays on top of your W2 salary — invisible to you, but real money that you'd lose as a 1099 contractor.

Benefits value included

Toggle between 'with benefits' (adds ~$8,000 in employer health coverage) and 'no benefits' for companies that don't offer insurance.

True 1099 equivalent rate

Get the minimum 1099 annual income needed to match your current W2 total compensation — so you never undersell your contract.

Use this calculator every time you receive a contract offer. Paste both rates in, toggle benefits on/off, and instantly know whether the 1099 premium compensates for what you'd lose going independent.

Fee rates verified and updated April 2026. Rates may change — verify directly with the platform before transacting.