Enter both offers with their real details — see them converted to the same units: expected take-home value per year.
Verdict
—
| 1099 offer, benefit-adjusted value | — |
| W-2 offer, total value | — |
| Difference | — |
| Break-even 1099 rate for this W-2 offer | — |
Pre-income-tax comparison with SE-tax and benefits adjustments — deductions and state specifics can move it. Directionally honest, not a tax return.
How the leveling works
1099 value = rate × billable hours − extra SE tax (~7.65%) − health premiums
W-2 value = salary + match + (PTO days × daily pay)
Each side gets credited what it really provides: the contractor's gross is haircut by the employer-side taxes they now pay themselves and the insurance they must buy; the employee's salary is topped up by the match and the paid days off. What remains is honestly comparable money.
A worked example
$75/hr at 1,800 billable hours grosses $135,000; minus ~$10,300 extra self-employment tax and $7,200 of premiums, the adjusted value is ~$117,500. The $120,000 W-2 with a 4% match ($4,800) and 25 paid days (~$11,500) totals ~$136,300. The salary wins by nearly $19,000 — the contractor rate would need to be about $86/hr to tie. This is why "they offered me more per hour" is where the math starts, not where it ends.
When 1099 wins anyway
Real business deductions (home office, equipment, travel), a working spouse's health plan (zeroing the premium line), the ability to stack clients, and S-corp tax structures at higher incomes all tilt the table back toward contracting. Run your actual numbers above — the point is deciding on arithmetic instead of vibes. Setting your own rate instead? Use the freelance rate calculator.
Frequently asked questions
How much more should a 1099 rate be than a W-2 salary?
Rule of thumb: 25–40% more in equivalent hourly terms. The gap covers the employer half of payroll taxes (7.65%), health insurance, paid time off, retirement match, and the unpaid gaps between contracts.
What is self-employment tax?
As a 1099 contractor you pay both halves of Social Security and Medicare — 15.3% on net earnings, versus the 7.65% an employee sees withheld. Half is deductible, but it's still roughly an extra 7% versus W-2 work.
Is $75/hour 1099 better than $120k W-2?
Close to a wash, and that surprises people. $75 × a realistic 1,800 billable hours is $135k gross, minus ~$10k extra self-employment tax, ~$12k health insurance, and no paid vacation or 401(k) match — the $120k W-2 with benefits often nets out ahead.
What are the non-money differences?
W-2: unemployment insurance, workers comp, legal protections, simpler taxes. 1099: business deductions (home office, equipment), control over schedule and clients, and no employer — which is a feature or a bug depending on the year.