1099 vs W-2 Rate Calculator
Turn a W-2 salary into the break-even 1099 hourly rate, or a contractor rate back into salary. Covers self-employment tax, benefits, and unbilled hours.
1099 vs W-2 Rate Calculator
Tax year
The offer
Switching direction swaps which figure you type in. Everything else you enter stays put, so you can flip back and forth on the same assumptions.
Gross salary before withholding. In reverse mode this field is solved for you and switches off.
The rate a client has quoted, or the one you are thinking of quoting. Active in reverse mode.
Used only to express the salary as an hourly figure and to compute the multiple. A standard payroll year is 2,080 hours.
Benefits the W-2 job pays for
The employer’s share of the premium, not your payroll deduction. Single coverage commonly runs $7,000 to $9,000; family coverage runs far higher.
Only the employer match belongs here. Your own deferral is money you set aside on either side of the fence, so it does not move the comparison.
Anything else the employer buys for you and a contract would not: group life, short and long-term disability, a training budget, a phone stipend.
Billable time
A preset writes the two fields below. Edit either one by hand and the preset steps aside.
Unpaid time off lives here rather than in a separate field. A contract with five weeks off is 47 weeks of work.
Drop below 100% for the hours you spend chasing work and keeping the books. A solo freelancer rarely bills more than 85% of the working week.
Business costs
Software, equipment, business insurance, accounting fees, a coworking desk. Do not put your health premium here. It is an above-the-line section 162(l) deduction, not a Schedule C expense, and burying it in expenses would shrink your net profit and understate the self-employment tax you owe.
Applied to the finished rate only, and kept out of the break-even figure so the two stay distinguishable. Contractors commonly add 10% to 20% for gaps between contracts and late payers.
Enter at least one billable hour.
These expenses exceed the contract’s gross receipts.
The employer’s own 7.65% FICA match has no line of its own here. It is already inside the self-employment tax figure, because you now pay both halves. Adding it again would double-count it. For the employer-side view of hiring (FUTA, SUTA, workers’ comp, burden multiple) see the employer payroll cost calculator, which this tool deliberately does not duplicate: those are costs of employing someone, not costs a contractor inherits.
Unbilled hours are measured against a 2,080 hour payroll year. The day rate is the finished hourly rate across a standard day, capped at 24 hours.
Show the math
| Line | Base it applies to | Rate | Amount |
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Parity is set on pre-income-tax cash: what the contractor keeps after self-employment tax and after buying their own benefits has to equal what the employee kept after FICA. Federal and state income tax sit outside the solve, because both sides face the same brackets. The Additional Medicare Tax uses the single-filer $200,000 threshold; married filing jointly should read it as $250,000.
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What a 1099 rate has to cover that a salary already did
A salary is not just the number on the offer letter. It arrives wrapped in things the employer pays for separately, and a contract rate has to buy every one of them back. In the order this calculator applies them:
- The employer half of payroll tax. An employee pays 7.65% FICA and the employer quietly pays another 7.65%. A contractor pays both halves as self-employment tax, at 15.3% on 92.35% of net profit.
- The health premium. Whatever the employer contributed toward your coverage is now a bill you pay yourself, at individual-market prices.
- The 401(k) match. Free money on the W-2 side, gone on the 1099 side. Your own deferral is not part of this, since you fund that either way.
- Other benefits. Group life, disability cover, a training budget, a phone stipend. Small individually, rarely small in total.
- Unbilled hours. The largest term, and the one most people forget. A salary pays for 2,080 hours a year including the weeks you were not at your desk. A contract pays only for hours you bill.
Run the defaults and the shape is clear. A $100,000 salary carries $7,650 of employee FICA and $14,500 of employer-funded benefits ($9,000 health, a 4% match worth $4,000, $1,500 of everything else). Replacing that cash after self-employment tax takes $124,432 of net profit. Add $3,000 of business expenses and you need $127,432 of gross receipts. Across 1,880 billable hours that is $67.78 an hour, or 1.41x the $48.08 the salary worked out to per payroll hour.
How the math works, line by line
The comparison is set on pre-income-tax cash. What the contractor keeps after self-employment tax and after buying their own benefits has to equal what the employee kept after FICA. Written out, with S for salary and P for net profit:
- Employee FICA: 6.2% Social Security on salary up to the 2026 wage base of $184,500, plus 1.45% Medicare on every dollar, plus 0.9% Additional Medicare Tax on anything above $200,000.
- Net earnings from self-employment: 92.35% of net profit. This is statutory, and it matters: apply 15.3% to gross receipts instead and you overstate the tax by more than a point.
- Self-employment tax: 12.4% on net earnings up to $184,500, 2.9% Medicare uncapped, 0.9% above $200,000.
- Parity: P minus SE tax minus benefits = S minus employee FICA.
- Gross receipts: net profit plus business expenses, then divided by billable hours to get the rate.
Both sides of that equation are piecewise linear, so the solve is exact rather than iterated, and the wage-base cap is honored wherever it bites. Above roughly $199,800 of net profit the 12.4% Social Security portion stops accruing, so the required multiple starts to fall. High earners need a smaller premium over their salary than mid-career workers do, which is what the cap notice above is telling you when it appears.
What is left out, on purpose: federal and state income tax. Both sides earn comparable amounts and face the same brackets, so income tax largely cancels. Where it does not cancel, it favors the contractor, who deducts half of the self-employment tax above the line and may claim the 20% qualified business income deduction. Because neither of those is in the solve, the rate this tool returns errs low: quote it and you land a little ahead, not behind. State income tax, state disability, local gross-receipts tax, and the employer-only taxes (FUTA, SUTA, workers’ comp) are all outside the model too.
Why billable hours move the rate more than tax does
Hold every other input at the defaults and change only the schedule. The answer swings by more than $23 an hour:
- Full year (2,080 billable hours): $61.27 an hour, 1.27x the W-2 hourly equivalent.
- Standard time off (1,880 hours): $67.78 an hour, 1.41x.
- Freelance, 47 weeks at 80% utilization (1,504 hours): $84.73 an hour, 1.76x.
The tax difference between those three cases is zero. The whole spread comes from dividing the same annual requirement over fewer hours. That is why the standard advice to "add 30% for taxes" produces rates that quietly lose money: it prices the smaller term and ignores the larger one. If you take five weeks off and lose a day a week to unpaid admin, you are billing roughly 1,500 hours, not 2,080, and your rate has to know that.
The other habit worth breaking is treating the health premium as a business expense. It is not one. Your own coverage is an above-the-line deduction under section 162(l), so putting it in the expenses field would shrink net profit, understate self-employment tax, and hand you a rate that is too low. Keep it in the benefits card where it belongs.
Putting the rate on paper
Settling on a number is the easy half. Documenting the income is the other half, and contractors hit that wall faster than employees do: no stub, no automatic year-to-date column, and a landlord or lender who wants both. The proof of income calculator works out what a given rate demonstrates over a documentation window, and the hourly to paystub earnings calculator turns the rate you just solved into per-period gross for an actual pay record.
Payslip44 builds that record. 1099 contractor sits alongside W-2, statutory, and owner as a classification in the app, with reusable employer, employee, and line-item templates, six layouts, decimal-precise money math, and export to PDF, PNG, CSV, or plain text. Everything runs on-device. Once you know your rate, download Payslip44 and put it on paper.
Frequently Asked Questions
Common questions about 1099 vs w-2 rate calculator
How much more should a 1099 contractor charge than a W-2 employee?
Between 1.25x and 1.5x the W-2 hourly equivalent covers most full-time contract work, and the defaults on this page land at 1.41x. Almost all of that spread comes from two things: the hours you cannot bill, and the health premium your employer used to pay. Payroll tax is the smallest piece of it. A contractor pays 15.3% self-employment tax where an employee paid 7.65%, but that extra 7.65 points applies to 92.35% of net profit, not to gross receipts.
How do I convert a W-2 salary to a 1099 hourly rate?
Take the salary, subtract the employee FICA already withheld from it, then add back everything the employer paid on your behalf: health premium, 401(k) match, and other benefits. That total is the cash you have to reproduce. Solve for the net profit that leaves the same cash after self-employment tax, add your business expenses, and divide by billable hours. On the defaults ($100,000 salary, $14,500 of benefits, $3,000 of expenses) that is $127,432 of gross receipts over 1,880 billable hours, or $67.78 per hour. Dividing by 2,080 instead is the classic mistake, and it costs you about $6.50 an hour.
What is the self-employment tax rate for 2026?
It is 15.3% on 92.35% of your net profit: 12.4% for Social Security on net earnings up to $184,500, plus 2.9% for Medicare with no cap at all. Above $200,000 of net earnings a further 0.9% Additional Medicare Tax applies (single filers; $250,000 married filing jointly). The 92.35% factor is statutory, not a rounding convenience, and it is why an effective rate on net profit is closer to 14.1%. The FICA tax calculator runs the 7.65% employee side per pay period.
Do 1099 contractors really pay twice as much tax as W-2 employees?
No. The 15.3% versus 7.65% comparison covers payroll tax only, and it overstates the gap twice over. Self-employment tax applies to 92.35% of net profit rather than to every dollar, and half of the self-employment tax you pay is deductible above the line under section 164(f). Net of both adjustments the real difference is roughly 7 points of net profit, not a doubling. Income tax brackets are identical on both sides.
Does the 20% QBI deduction change what rate I should charge?
It lowers your income tax, not your self-employment tax, so it does not change the break-even rate this tool returns. For 2026 the full 20% qualified business income deduction is available below $201,750 of taxable income (single and head of household) or $403,500 (married filing jointly), phasing in over the next $75,000 and $150,000 respectively. Because this calculator omits QBI and the half-of-SE-tax deduction, its answer is slightly conservative: quote the rate it gives and you come out marginally ahead.
How many hours a year can a contractor actually bill?
2,080 is a payroll year, not a billable year. A full-time contract with five weeks of unpaid time off is about 1,880 hours. Project freelancing at 75% to 85% utilization, once you count sales calls, invoicing, and bookkeeping, lands nearer 1,400 to 1,600. Use the schedule chips above to switch between those cases and watch the required rate move: the same annual requirement spread over fewer hours is exactly what raises it.
Should health insurance go in my business expenses?
No. Your own premium is an above-the-line self-employed health insurance deduction under section 162(l), not a Schedule C expense. Putting it in business expenses understates your net profit, which understates the self-employment tax you owe and hands you a rate that is too low. Leave the business expenses field for software, equipment, insurance on the business itself, and professional fees, and let the health premium field above carry what the W-2 job used to pay.
Can I choose whether to be paid as 1099 or W-2?
Not freely. Classification follows the working relationship, not a preference on either side. The IRS common-law test weighs behavioral control, financial control, and the nature of the relationship, and Form SS-8 exists for cases that are genuinely unclear. Misclassifying an employee as a contractor exposes the payer to back employment taxes, interest, and penalties, and it can trigger a Department of Labor wage-and-hour claim on top.