Quick Answer
The Contractor vs. Employee Cost Calculator provides an educational estimate using the figures you enter. It is designed for taxpayers who want a fast planning view before preparing a return or meeting with a CPA.
How to Use This Calculator
- Enter your filing status and the requested income or expense amounts.
- Review the real-time estimate in the result summary.
- Use the result as a planning starting point and confirm your final return details.
The Formula & Math
Employee total cost = salary + employer payroll taxes (FICA ~7.65%, FUTA, SUTA) + health insurance + retirement match + PTO cost + other benefits. Contractor cost = hourly rate × annual hours.
Real-World Example
A $70,000 salaried employee with $6,000 health, $2,100 retirement match, and 10 PTO days costs roughly $89,000–$92,000 all-in. A contractor at $55/hr for 2,080 hours costs $114,400 — but with no benefits overhead.
FAQ
Is this an official IRS calculation?
No. It is an educational estimate and does not replace tax software, a filed return, or professional advice.
Does it include every tax rule?
No. Special deductions, credits, state rules, and changes in law can affect the final amount.
Which tax year does it use?
This calculator uses the stated 2026 planning assumptions where applicable.
When to Consult a CPA
- Your income comes from a business, rental, investment, or multiple states.
- You are making a major transaction or planning decision.
- Your estimate differs materially from your withholding or prior-year return.