W-2 vs 1099 Comparison Calculator

Deciding between a W-2 role and 1099 contract work comes down to what you actually keep after taxes, benefits, and business costs, and this tool puts the two side by side. The distinction carries weight in 2026, as the IRS keeps a close watch on worker classification, with misclassification penalties running as high as $50 for each W-2 form that goes unfiled.

Net income is found by stripping federal taxes, state taxes, FICA or self-employment taxes, health insurance, retirement contributions, and business expenses out of gross income. A W-2 employee splits the 15.3% FICA tax with the employer, who covers half; a 1099 contractor shoulders the full 15.3% self-employment tax but can write off business expenses and deduct the employer-equivalent share.

One thing contractors cannot skip is quarterly estimated tax payments, and a common rule of thumb is to set aside roughly 25% of net income to cover what comes due. Expenses are easy to undercount, too, since equipment, software subscriptions, and home office costs add up and tilt the comparison. For tangled situations, multiple income streams or large deductions, a tax professional is worth the call.