W-2 vs 1099 vs C2C calculator
Enter a contract rate or a salary and see what a developer keeps, and what the company pays, as an employee, an independent contractor or through their own corporation.
Assumptions
If you’re hiring: cost to your company per year
The contractor’s rate already covers their payroll tax, benefits and unpaid time. Employee cost excludes recruiting, equipment and management overhead. To find a market rate for a specific stack, use the rate calculator.
Taxes use the 2026 federal brackets and standard deduction, the $184,500 Social Security wage base, 15.3% self-employment tax on 92.35% of net earnings, and the 20% QBI deduction, which above $201,750 of taxable income ($403,500 joint) phases down to 50% of W-2 wages paid (software work assumed not to be a specified service business). State tax applies the state’s top marginal rate to taxable income, which overstates it in states with graduated rates; edit the rate to match your bracket. Benefits, health insurance, expenses and overhead are our assumptions; change them under Assumptions. Estimates only: talk to a CPA before choosing a structure.
How each model works
W-2 employee
The employer withholds income tax and pays half of FICA (7.65%); you pay the other half. In return you usually get health insurance, a 401(k) match, paid time off, unemployment insurance and workers’ comp. We value that package at $15,000 a year by default.
The W-2 hourly rate is the contract rate ÷ 1.3–1.6, because the employer absorbs the payroll tax, benefits and overhead a contractor has to cover.
1099 independent contractor
You’re paid the full rate with nothing withheld, and owe self-employment tax of 15.3% on 92.35% of net earnings: both halves of Social Security (12.4%, up to $184,500 in 2026) and Medicare (2.9%). Half of it is deductible.
You pay your own health insurance, retirement and business expenses, and can take the 20% QBI deduction on business income.
C2C (S-Corp)
You bill through your own company, usually an LLC taxed as an S-Corp. You pay yourself a reasonable salary and take the rest as distributions. Payroll tax applies only to the salary.
The saving is partly offset: the S-Corp pays $3,000 or so a year more in accounting, payroll and state fees, and the 20% QBI deduction applies only to profit after salary.
When does C2C make sense?
Against 1099, it depends mostly on the salary you pay yourself. At $150,000 of revenue our model puts C2C $3,491 ahead of 1099 with a 50% salary, $726 ahead of 1099 at 60% and $2,069 behind 1099 at 70%. A lower salary saves more payroll tax but shrinks the QBI deduction and invites IRS scrutiny. Above the Social Security wage base ($184,500) the 1099 contractor stops paying the 12.4% part, which narrows the gap again.
| Revenue | 50% salary | 60% salary | 70% salary |
|---|---|---|---|
| $100,000 | +$1,636 | −$199 | −$2,034 |
| $150,000 | +$3,491 | +$726 | −$2,069 |
| $200,000 | +$4,957 | +$1,231 | −$2,495 |
| $250,000 | +$2,089 | −$2,569 | −$7,227 |
C2C (S-Corp) take-home minus 1099 take-home at the same revenue, by S-Corp salary as a share of revenue. Single filer, no state tax, $7,200 health insurance, $2,400 business expenses for both, plus $3,000 of corp overhead for the S-Corp.
C2C beats W-2 when you don’t need employer benefits (a spouse’s plan, or a marketplace plan you’re happy with) and you can keep billable hours steady between contracts. Unbilled weeks hit contractors hardest: try 46 billable weeks above.
For hiring managers, C2C is usually the cleanest way to engage an independent developer: two businesses contracting, with the contractor responsible for their own tax and insurance. The full guide covers misclassification risk and setup.