1099 vs W-2: what rate do you actually need?

• Payroll tax doubles for you. A W-2 employee pays 7.65%; you pay the employer half too, so 15.3% on net earnings.
• No employer benefits. Health insurance, retirement match, paid time off, sick leave and disability cover all come out of your rate.
• Unpaid time is real. Vacation, holidays, illness and gaps between contracts are unbilled weeks.
• You get deductions. Legitimate business expenses reduce the profit that gets taxed — the one structural advantage on your side.

Take the salary you'd accept, add roughly 25-35% to cover the extra payroll tax and lost benefits, then divide by your realistically billable hours — usually about 1,700-1,800 a year, not 2,080.

Example: a $100,000 salary target → about $130,000 of contract revenue → roughly $75/hour at 1,750 billable hours.

The calculator on this site shows the W-2 salary equivalent of your contract income after federal income tax and self-employment tax, so you can compare a rate and an offer on the same basis.

Is 1099 ever better than W-2?

Often, once the rate is right: you keep control of your schedule and deduct real business costs. It's worse when the rate merely matches a salary.

How much more should a 1099 rate be?

Most contractors target 25-35% above the equivalent salary, more if you're buying family health coverage yourself.

Can an employer just reclassify me as 1099?

Not freely. Worker classification depends on control and independence, not on what the contract is called. Misclassification is an IRS issue for the employer.