| W-2: your share of FICA, 7.65% | $80,000 — the employer pays the other half | −$6,120 |
| 1099: profit after expenses | $90,000 − $4,000 | $86,000 |
| 1099: self-employment tax, 15.3% | on $79,421 of net earnings | −$12,151 |
| W-2, before income tax | $80,000 − $6,120 | $73,880 |
| 1099, before income tax | $86,000 − $12,151 | $73,849 |
- Break-even contract income is about $90,037. Below that the salary wins on cash alone.
- You deduct half the self-employment tax against income tax, which narrows the gap a little. Income tax itself is the same on both sides and is left out.
- Not counted: a retirement match, paid leave, unemployment insurance and the employer's other benefits. Those often matter more than the arithmetic above.
- Whether you may be treated as a contractor at all is decided by how the work is controlled, not by what the contract is called.
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The figures this uses
| Figure | 2026 | Source |
|---|---|---|
| Self-employment tax rate | 15.3% — 12.4% Social Security plus 2.9% Medicare, applied to 92.35% of net profit | irs.gov |
| Social Security wage base | $184,500 for 2026. Only Social Security has a wage base; Medicare has none | irs.gov |
| Additional Medicare Tax | 0.9% above $250,000 married filing jointly · $125,000 married filing separately · $200,000 single, head of household and qualifying surviving spouse. No employer match | irs.gov |
How the calculation works
The calculator compares what a salary and a contract leave you with before income tax, because that is where they differ.
The salary.
- Your share of Social Security, 6.2% of wages up to the $184,500 wage base for 2026.
- Your share of Medicare, 1.45% of all wages.
- The salary less both.
The contract.
- Profit: the contract income less the business expenses you would deduct.
- Net earnings: profit times 92.35%.
- Self-employment tax: 12.4% of net earnings up to $184,500, plus 2.9% of all of them.
- Profit less that tax.
The headline is the difference between the two results. The calculator also works out the break-even contract income: the contract figure at which you would keep exactly what the salary leaves you, after self-employment tax and the same expenses.
Reading the result
With no expenses and income under the wage base, a contract has to pay about 7.5% more than a salary to leave the same amount before income tax, and that is before any benefit is counted. The expenses you can deduct as a contractor narrow the gap, because they lower the profit that self-employment tax is charged on. Money for equipment, software or a home office that an employer would have supplied anyway is not a saving, only a cost that has moved to you.
What it leaves out
- Income tax, which is about the same either way and is left off both sides.
- Benefits, as the notes under the result list.
- The Additional Medicare Tax, which applies to both salaries and self-employment income at higher incomes.
- Whether the work can be a contract at all. See the three tests and, for when self-employment tax starts, $400 is not the line most people think it is.
Common questions
Why does the contract need to pay more to break even?
Why is income tax left out?
Is it my choice whether I am a contractor or an employee?
What about benefits?
This calculator is for educational purposes only and does not constitute tax, legal, or financial advice. It covers United States federal tax and simplifies in the ways noted beside each result. Consult a qualified tax professional about your situation.