Paycheck & Taxes
1099 vs W-2 Calculator
A 1099 rate has to cover taxes, benefits, unpaid time, and business costs. Estimate the break-even contractor rate before accepting the offer.
The 1099 scenario nets about $70,700 after reserves and costs, versus a rough W-2 net of $63,750.
Breakdown
| 1099 gross revenue | $117,000 |
|---|---|
| Tax reserve | $35,100 |
| 1099 after listed costs | $70,700 |
| Rough W-2 after-tax value | $63,750 |
| Selected state (none income-tax level, official benchmarks) | Texas |
| State income tax estimate (Planning-level state profile) | 0% |
| Rent cost pressure (2023 ACS B25064: $1,413/mo median gross rent) | near U.S. baseline |
| Childcare cost pressure (2023 DOL NDCP: $10,078/yr infant center care) | 21% below U.S. baseline |
| Car insurance pressure | 20% above U.S. baseline |
| Healthcare cost pressure | 2% below U.S. baseline |
- Contractor pay should cover taxes, benefits, unpaid time, and business costs.
- This does not determine legal worker classification.
- State data is an estimate for planning. Confirm tax, marketplace, insurance, housing, and benefit decisions with official state or federal sources.
- State rent and childcare benchmarks use Census ACS 2023 median gross rent and U.S. Department of Labor NDCP 2023 state childcare estimates where available.
- Confirm taxes with the Texas tax agency and IRS state-government links.
Estimate only, not tax, legal, financial, or medical advice. Always confirm important decisions with official sources or a qualified professional.
Copyable inputs
Contractor pay should cover benefits, risk, taxes, admin time, and business overhead.
Estimated contractor comparison quick reference
Use these reference points before entering your own numbers. The calculator above gives a more useful estimate for your exact situation.
| Item | Rule of thumb | Note |
|---|---|---|
| Self-employment tax | Important | Contractors pay both employee and employer sides in broad terms |
| Unpaid time | Often hidden | Vacation, sick time, admin, and gaps matter |
| Break-even thinking | Required | Compare annual net value, not just hourly rate |
This is a planning estimate and not worker-classification, legal, or tax advice.
Before You Decide
- Include health insurance and unpaid days.
- Include software, equipment, accounting, and tax prep.
- Reserve cash for estimated taxes.
- Compare retirement match and PTO value from the W-2 offer.
Next three steps
- Calculate the contractor annual gross.
- Subtract expenses and tax reserve.
- Compare with W-2 benefits and stability.
Estimate only, not tax, legal, financial, or medical advice. Always confirm important decisions with official sources or a qualified professional.
Frequently Asked Questions
- Is 1099 always better if the hourly rate is higher?
- No. The rate has to cover taxes, benefits, unpaid time, and business expenses.
- Does this determine worker classification?
- No. Classification is a legal and tax issue.
- What rate should a contractor charge?
- A common starting point is to compare the required net value after all hidden costs.