Payroll & contractors
1099 vs W-2 Rate Calculator
Find the contract rate that actually matches a salary once self-employment tax and lost benefits are counted. The gap is bigger than most people expect.
| Salary | $95,000 |
|---|---|
| Benefits you would have to buyadded to the target | $12,000 |
| Employee FICA7.65% employee share | $7,268 |
| Self-employment tax15.3% of 92.35% of profit | $16,410 |
| Deductible halfreduces income tax, not SE tax | −$8,205 |
| Contract gross needed | $116,143 |
Excludes unemployment insurance, which contractors generally cannot claim, and the admin cost of running a business. Classification is also not a choice — it is determined by the actual working relationship, not by what the contract says.
Details people get wrong
- Why is self-employment tax not simply double FICA?
- Two adjustments soften it. Self-employment tax applies to 92.35% of net profit rather than all of it, and half of the tax is deductible against income tax. So the 15.3% headline is heavier than an employee’s 7.65% but not twice as heavy.
- Is Social Security capped for the self-employed?
- Yes, at the same wage base as employees — $184,500 for 2026. Above it only the 2.9% Medicare portion continues, so the marginal cost of contracting falls sharply once you pass the cap.
- What does this calculator leave out?
- Unpaid time off, which is the item people forget most often. An employee with three weeks of paid leave is paid for 2,080 hours but works about 1,960. It also excludes unemployment insurance, which contractors generally cannot claim, and the administrative cost of running a business.
- Can I just choose to be a contractor?
- No. Worker classification is determined by the actual working relationship — control over how and when the work is done — not by preference or by what the contract says. Misclassification exposes the business to back taxes and penalties regardless of what both parties agreed.