1099 vs W-2 calculator
Compare a 1099 contractor rate with a W-2 offer on equal terms. Enter both offers to see gross pay, payroll and self-employment tax, benefits and expenses side by side, and the break-even 1099 hourly rate that matches the W-2 package. Built for locum tenens, travel and per diem clinicians.
The 1099 offer comes out $2,873 a year ahead of the W-2 offer before income tax.
| Item | W-2 | 1099 |
|---|---|---|
| Hours worked | 1,920 | 1,920 |
| Pay for hours worked | $115,200 | $163,200 |
| Paid time off | $7,200 | — |
| Gross pay | $122,400 | $163,200 |
| Payroll tax (FICA / SE tax) | −$9,364 | −$22,494 |
| Health insurance | +$7,200 | −$7,200 |
| Retirement match | +$4,896 | — |
| Other benefits | +$1,500 | — |
| Business expenses | — | −$4,000 |
| Comparable compensation | $126,632 | $129,506 |
| Per hour worked | $65.95 | $67.45 |
Half of the SE tax ($11,247) is deductible, and the 1099 income may qualify for the QBI deduction. Both lower income tax, which isn't modeled here.
Estimates, not tax or legal advice. Compares both offers before federal and state income tax using 2026 federal FICA and self-employment tax rules. The 0.9% Additional Medicare Tax and wages from other jobs are not modeled. Example inputs are illustrative.
1099 vs W-2: the difference
The two forms name two different working relationships. A W-2 employee is on the payer's payroll: the employer withholds income tax and the employee's share of FICA, pays its own matching FICA, unemployment tax and workers' comp, and may offer health insurance, retirement contributions and paid time off. A 1099 independent contractor is paid the gross rate with nothing withheld, pays both halves of Social Security and Medicare through self-employment tax, makes quarterly estimated tax payments and funds their own benefits.
That's why the hourly rates aren't comparable. A 1099 rate has to be higher to leave the same amount in the clinician's pocket. The calculator puts both offers on one basis, called comparable compensation:
Both are measured before income tax. The difference between them is what one offer is worth over the other in a year.
What the self-employment tax is
Self-employment (SE) tax is Social Security and Medicare for people who work for themselves. It covers the same 7.65% an employee pays plus the 7.65% an employer would otherwise pay.
The 92.35% factor (100% − 7.65%) treats the contractor like an employer that deducts its half of FICA before paying wages. On $100,000 of net profit, net earnings are $92,350 and SE tax is $14,129.55. A W-2 employee earning the same amount would have $7,650 of FICA withheld. No SE tax is due if net earnings are under $400.
- Deductible half of SE tax
- Half of SE tax ($7,064.78 in the example) is deducted from income when you calculate income tax. It doesn't reduce the SE tax itself.
- Qualified business income (QBI) deduction
- Many contractors can deduct up to 20% of qualified business income for income tax. Health care is a specified service trade or business, so the deduction phases out above an income threshold.
The calculator shows both deductions as notes rather than modeling them, because their value depends on your income tax bracket, filing status and household income.
What you give up on a 1099
A W-2 rate understates the package. Moving to 1099 means paying for, or going without:
- The employer half of FICA. 7.65% of wages (6.2% Social Security up to the wage base, 1.45% Medicare) that a W-2 employer pays on top of your pay. On a 1099 it is part of your SE tax.
- Health insurance. The employer's share of the premium. Contractors buy their own coverage, which is deductible for income tax but not for SE tax.
- Retirement contributions. A W-2 employer match is extra money. A contractor can open a SEP-IRA or solo 401(k), but every dollar in it comes out of their own earnings.
- Paid time off. A 1099 contractor is paid only for hours worked. Vacation, sick days and holidays are unpaid, so enter only billable weeks.
- Other benefits and protections. CME allowances, disability and life insurance, employer-paid malpractice, unemployment insurance and workers' comp.
- Expenses. Licenses, credentialing, CME, accounting, equipment and malpractice when the client or agency doesn't cover it.
How to calculate a break-even 1099 rate
The break-even rate is the 1099 hourly rate whose comparable compensation equals the W-2 package. Work backwards from the W-2 figure:
Above the Social Security wage base the divisor switches to (1 − 2.9% × 92.35%), plus the capped Social Security amount. The calculator handles that automatically. The table applies the example assumptions: on the W-2 side, 40 hours a week for 48 weeks, 15 PTO days, $600/month employer health, a 4% match and $1,500 of other benefits; on the 1099 side, the same hours and weeks, $4,000 of business expenses and $600/month health insurance. The numbers are illustrative, not market data.
| W-2 rate | W-2 gross pay | W-2 comparable comp. | Break-even 1099 rate | 1099 premium |
|---|---|---|---|---|
| $40.00/hr | $81,600 | $87,322 | $59.41/hr | +48.5% |
| $60.00/hr | $122,400 | $126,632 | $83.26/hr | +38.8% |
| $80.00/hr | $163,200 | $165,943 | $106.99/hr | +33.7% |
| $120.00/hr | $244,800 | $248,303 | $151.06/hr | +25.9% |
| $200.00/hr | $408,000 | $415,665 | $240.63/hr | +20.3% |
The premium needed falls as pay rises, from 48.5% at $40.00/hr to 20.3% at $200.00/hr. Fixed-dollar benefits are a smaller share of a large paycheck, and Social Security tax stops at the wage base.
Locums vs travel nursing vs per diem
How clinicians are usually classified depends on the type of work:
| Work type | Usual classification | What to compare |
|---|---|---|
| Locum tenens physicians | 1099 independent contractor | Daily or hourly rate vs a permanent W-2 salary; malpractice usually provided by the agency |
| Locum NPs, PAs, CRNAs | 1099 or W-2, by agency and state | Ask which; a W-2 locum rate needs no SE-tax adjustment |
| Travel nurses and allied | W-2 agency employee | Taxable hourly base plus non-taxable stipends, not a 1099 rate |
| Per diem | Either: W-2 with a hospital or agency, 1099 with some shift apps | Per diem W-2 rates often come without benefits, so enter $0 for them |
Locum tenens is the main 1099 market in health care; see what locum tenens means and how locum pay works. Travel nurse packages are W-2 with stipends, so the comparison that matters is how the package splits between taxable wage and stipends, covered in the travel nurse pay breakdown. Per diem varies the most, as explained in what per diem means in health care.
Stipends aren't modeled here. To compare a travel contract with a 1099 offer, enter the taxable hourly base as the W-2 rate and add the annual stipend total to other benefits, since stipends are paid without FICA.
Classification risk for agencies and facilities
Whether a clinician is an employee or a contractor isn't a choice the parties make in the contract. The IRS weighs the facts and circumstances of the relationship under the common-law test, grouped into behavioral control, financial control and the relationship of the parties. The Department of Labor applies its own economic-reality test for wage and hour law, and some states use a stricter ABC test.
- Exposure. A misclassified worker can mean back payroll taxes, penalties and interest, unpaid unemployment and workers' comp premiums, overtime claims and benefit plan eligibility issues.
- Clinical work raises the stakes. Schedules, protocols and supervision set by the facility can look like behavioral control, even for licensed professionals.
- Cost comparisons should be like-for-like. A 1099 rate saves the payer employer FICA, unemployment tax, workers' comp and benefits. Our employee cost calculator shows that burden for a W-2 role, and the bill rate calculator prices it into a bill rate.
This is general information, not legal advice. Agencies and facilities should have employment counsel review how each role is classified, state by state.
Frequently asked questions
How much more should a 1099 contractor make than a W-2 employee?
Enough to cover the employer half of payroll tax, the benefits and paid time off you give up, and your own business expenses. There is no fixed percentage. Under this page's example assumptions (40 hours a week, 48 weeks, 15 PTO days, $600/month employer health, a 4% match and $1,500 of other benefits on the W-2 side; $4,000 of expenses and $600/month health insurance on the 1099 side), a $60.00/hr W-2 job breaks even at about $83.26/hr on a 1099, 38.8% more. The premium shrinks as pay rises because benefits are a smaller share of the package and Social Security tax stops at the wage base.
What is the self-employment tax rate?
15.3%: 12.4% for Social Security on net earnings up to the $184,500 wage base for 2026, plus 2.9% for Medicare with no cap. It applies to 92.35% of net self-employment profit, so the effective rate on profit is about 14.1% below the wage base. Half of the tax is deductible when you calculate income tax.
Is it better to be 1099 or W-2?
It depends on the rate gap, not the label. A 1099 contract pays more per hour when it clears the break-even rate, and it can open up business deductions, the QBI deduction and larger self-funded retirement contributions. A W-2 job comes with employer-paid payroll tax, benefits, paid time off, unemployment insurance and workers’ compensation, and less paperwork. Compare both offers on hours actually worked.
Are locum tenens physicians 1099?
Most locum tenens physicians work as 1099 independent contractors, and the agency usually provides malpractice coverage for the assignment. Some agencies place NPs, PAs and CRNAs on W-2 instead, depending on the agency, the state and the setting. Classification follows how the work is actually controlled, not just the contract.
Do travel nurses get a 1099?
Usually not. Most travel nurses are W-2 employees of their staffing agency, paid a taxable hourly wage plus non-taxable stipends for housing and meals when they qualify. Some per diem shift marketplaces engage nurses as 1099 contractors, so check the contract before comparing rates.
Does the calculator include income tax?
No. It compares both offers before income tax, so the result doesn’t depend on your filing status, state or other income. Income tax can shift the result: half of SE tax, business expenses, self-employed health insurance and the QBI deduction reduce a contractor’s taxable income, while employer health and retirement contributions are untaxed for a W-2 employee. Ask a tax professional to model your situation.