Worksheet reviewed October 12, 2026. All starting figures below are hypothetical, not current market quotes.
A higher hourly rate is only the starting point.
Compare paid hours, time off, benefits, business expenses, and taxes. Then look at the schedule and responsibilities you are agreeing to. A few extra dollars an hour can disappear quickly when the rest of the offer changes.
Compare the same year of work.
A W-2 offer may pay for vacation, holidays, health coverage, malpractice, and retirement benefits. A 1099 rate may need to cover those costs yourself. The contract decides which costs belong in the comparison.
Use W-2 paid hours and 1099 billable hours. If time off already reduces billable hours, do not subtract a separate vacation cost again.
A worked example.
Suppose a W-2 offer pays $110 an hour for 2,080 paid hours. A 1099 contract pays $150 an hour for 1,840 billable hours. The worksheet starts with these same assumptions:
| Illustrative annual input | W-2 | 1099 |
|---|---|---|
| Gross pay / revenue | $228,800 | $276,000 |
| Employee / replacement benefits | $4,800 | $18,000 |
| Separate business expenses | $0 | $12,000 |
| Assumed employee / self-employment payroll taxes | $15,000 | $30,000 |
| Cash before income tax | $209,000 | $216,000 |
| Employer retirement contribution | $10,000 | $0 additional |
| Cash + employer retirement, before income tax | $219,000 | $216,000 |
The 1099 offer leaves $7,000 more cash in this example before income taxes. Including the W-2 employer retirement contribution puts the W-2 offer $3,000 ahead on this limited comparison. Income taxes, plan choices, and the actual benefits can change the answer.
This is not take-home pay. The payroll-tax figures are editable assumptions, not calculated taxes. The worksheet does not calculate federal, state, or local income taxes, deductions, or retirement-plan limits. Replace the tax estimates with a projection for your household and business structure.
Try your own offer numbers.
Annual amounts unless marked hourly. Business expenses should exclude benefit costs and owner payroll taxes entered separately. Your own retirement savings come from cash already counted; do not add them again as an extra employer benefit.
Payroll-tax inputs: illustrative annual estimates. This tool does not calculate payroll or income taxes. Inputs stay in this page and are not submitted.
What the calculator cannot tell you.
- How the benefits compare. Review health coverage, disability, malpractice and tail coverage, CME, licensing, travel, and retirement vesting. A replacement premium may buy different coverage.
- Your actual tax result. Other household wages, business deductions, entity structure, and retirement contributions affect the projection. A 1099 role does not automatically mean a higher total tax bill.
- Whether the work fits your life. Call requirements, cancellation risk, schedule stability, travel, and administrative work belong in the decision.
Gather the written offers, benefits summaries, expected hours, and tax information. Those give us enough to build a comparison you can use.
Put the offers beside the rest of your plan.
At On Point, we connect the contract comparison with taxes, retirement funding, insurance, and cash flow. That helps you see what a change would mean for the household.
Still getting organized? Start with the Free Checkup.
Original 2024 video and workbook
The historical video and workbook remain available for context. They use older assumptions and simplified tax calculations. The original article used a $135 contractor rate while the workbook used $140. They are not the calculator or assumptions used above, and should not be used to estimate current take-home pay.
Watch the original video · Open the unchanged historical workbook
Educational comparison, not individualized tax or career advice. For current rules, see IRS self-employed guidance and retirement contribution limits.