Free W-2 vs 1099 Salary Equivalent Calculator
A W-2 salary offer and a 1099 contract rate are not directly comparable numbers. An employer paying you $85,000 a year is also quietly covering half of your Social Security and Medicare tax, part of your health insurance, a 401k match, and every paid holiday and vacation day you take. None of that shows up in the headline salary figure, but all of it has to come out of your own pocket as a 1099 contractor.
This calculator converts between a W-2 salary and its 1099 equivalent (and back) so you can compare offers honestly, whether you are weighing a full-time job against freelancing or trying to figure out what to quote a client who wants to know "why not just hire you as an employee?"
Compare a W-2 salary offer to an equivalent 1099 contractor rate, accounting for payroll tax, benefits, and paid time off.How to use this tool
- Choose whether you are starting from a W-2 salary offer or a 1099 income figure.
- Enter that amount, then adjust the benefit defaults to match your real health insurance, retirement match, and PTO.
- Review the equivalent salary and hourly-rate breakdown, then download, print, or reset as needed.
W-2 vs 1099 Salary Equivalent Calculator
What are you starting with?
The gross annual salary in the offer, before taxes.
Used to convert annual figures into hourly rates.
Employer-Paid Benefits (Annual Value)
These are costs a W-2 employer typically covers that a 1099 contractor has to pay for out of pocket. Edit them to match the actual offer or your actual costs.
Annual employer share of health premiums. US average employer contribution is roughly $6,000-$8,500 for single coverage.
Annual dollar value of employer 401k matching contributions. A 1099 worker funding a Solo 401k or SEP IRA gets no match.
Dollar value of paid vacation, sick days, and holidays included in the W-2 salary.
Number of paid days off per year. Used to figure out how much higher a 1099 hourly rate needs to be to cover unpaid time off.
Salary Equivalent
A $85,000.00 W-2 salary is roughly equivalent to
$106,202.50
as a 1099 contractor, per year
W-2 Base Salary
$85,000.00
+ Self-funded payroll tax (employer's 7.65% share)
+$6,502.50
+ Self-funded health insurance
+$7,200.00
+ Self-funded retirement match
+$3,000.00
+ Self-funded PTO & holiday value
+$4,500.00
= 1099 Equivalent Annual Income
$106,202.50
Hourly Rate Impact of Unpaid Time Off
W-2 Effective Hourly Rate
$40.87/hr
1099 Rate Needed (billing only 49.0 weeks/yr)
$54.18/hr
Because a 1099 contractor is not paid for the 15 days off counted above, the same annual income has to be billed across fewer working weeks. That makes the required hourly rate about 6.1% higher than a naive annual-income-divided-by-52-weeks estimate.
W-2 vs 1099 Calculator FAQ
Why is a 1099 rate higher than a W-2 salary for the "same" money?
A W-2 employee only pays half of Social Security and Medicare tax (7.65%); the employer quietly pays the other half. A 1099 contractor pays both halves through self-employment tax, and also has to self-fund benefits like health insurance, retirement matching, and paid time off that an employer would otherwise provide.
Does this calculator account for exact self-employment tax brackets?
No, it uses a simplified model. Self-employment tax is technically 15.3% on 92.35% of net self-employment income up to the Social Security wage base, then just the 2.9% Medicare portion continues, plus an additional 0.9% Medicare surtax above roughly $200,000 (single) or $250,000 (joint). This tool approximates the gap as the employer-paid 7.65% share rather than modeling every bracket, so treat results as a planning estimate, not tax advice. For the full math, see our Self-Employment Tax Guide.
Why does paid time off matter if I am comparing annual income?
An annual W-2 salary already includes pay for holidays, sick days, and vacation. A 1099 contractor who takes the same days off earns nothing on those days, so the same annual income must be billed across fewer working weeks, which pushes the effective hourly rate higher.
Should I use my exact benefits costs instead of the defaults?
Yes. The default health insurance, retirement match, and PTO values are rough national averages. Replace them with your actual offer letter or benefits statement numbers for a more accurate comparison.
Next step
Once you've finished here, keep the momentum going with one of these.
Frequently Asked Questions
Is the 1099 equivalent number exact?
No. It is a planning estimate based on simplified payroll tax and benefits assumptions, not a substitute for tax or legal advice. Use it to sanity-check offers, not to file a return.