Is the usual advice to add thirty percent right?

It is the right order of magnitude and it is not a constant. The gap depends on how the benefits were valued and on whether the billing crosses the Social Security wage base, above which the payroll-tax component flattens.

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1099 vs W-2 Calculator

What a contract rate has to be to match a salary. A contractor pays both halves of payroll tax and buys their own benefits, so the same money is worth substantially less.

Also called: contractor vs employee, w2 to 1099 rate.

1099 gross that matches the W-2 offer

$123,742.10

You would need to bill $123,742.10 as a contractor to match a $100,000 salary with benefits. At $130,000 you are ahead on the contract.

W-2 package value

$115,000.00

1099 net after self-employment tax and expenses

$120,815.79

Self-employment tax on the contract

$18,368.42

Difference

$5,815.79

How the two compare

ahead on the contract

How this is calculated

Computed from the published rates for the tax year you selected, which is not necessarily the current year. A calculation, not tax advice, and it does not know anything about your circumstances beyond the figures entered.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for United States change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

An employee receives benefits the employer pays for and only half of payroll tax comes out of their pay. A contractor gets neither: both halves of Social Security and Medicare come out of the billing, and health cover, retirement matching and paid leave all come out of what is left. This finds the gross billing that leaves the contractor level with the salaried package, then compares it to the rate actually offered.

the contract rate has to cover the employer half of payroll tax and the benefits the salary included

S: W-2 salary (currency)
b: Benefits as a share of salary (decimal)
R: Equivalent contract gross (currency)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a 100,000 salary with 15% benefits

W-2 salary offered: $100,000.00
Value of W-2 benefits, as a share of salary: 15%
1099 gross you would bill: $130,000.00
Deductible business expenses: $0.00
Tax year: Tax year 2025

1099 gross that matches the W-2 offer$123,742.10

arithmetic identity on the package side

Open this example

a rate below the equivalent is behind

W-2 salary offered: $100,000.00
Value of W-2 benefits, as a share of salary: 15%
1099 gross you would bill: $105,000.00
Deductible business expenses: $0.00
Tax year: Tax year 2025

1099 gross that matches the W-2 offer$123,742.10

boundary: 105,000 cannot cover 115,000 of value plus the employer half of payroll tax

Open this example

Method and limits

What it assumes

Benefits are valued at the share of salary you enter. Health cover alone is often ten to fifteen percent.
The contractor has no other wages, so the whole billing is subject to self-employment tax up to the wage base.

What it deliberately does not model

Income tax is the same on both sides at the same total income and so cancels out. The comparison is on payroll tax and benefits only.
It does not price unpaid leave, gaps between contracts, or the administrative cost of running a business.

Sources

IRS Publication 15, Employer Tax Guide (primary government)
SSA. Contribution and Benefit Base (primary government)

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Is the usual advice to add thirty percent right?: It is the right order of magnitude and it is not a constant. The gap depends on how the benefits were valued and on whether the billing crosses the Social Security wage base, above which the payroll-tax component flattens.