1099 vs W-2 calculator
A contract offer isn't really higher pay until it covers what an employer used to hide: payroll tax, benefits, and paid time off. Enter the salary you're comparing against and we'll show the 1099 hourly rate that actually breaks even.
Why a 1099 rate has to be higher than a W-2 salary
When two offers look similar on paper — say a $90,000 salary versus "$45 an hour" — they are rarely equal. A W-2 job quietly bundles in things you don't see on your paycheck. As a 1099 contractor, every one of those becomes your responsibility, so your headline rate has to be higher just to break even.
The three gaps this calculator closes
1. Self-employment tax. A W-2 employee pays 7.65% in Social Security and Medicare tax; the employer pays a matching 7.65% that never appears on the pay stub. A contractor pays the whole 15.3% self-employment tax. We add back that employer-side 7.65% so your rate covers it. (Half of your SE tax is later deductible against income tax — a real but smaller offset we leave out to keep the estimate conservative.)
2. Lost benefits. Employer-paid health insurance, a 401(k) match, and other perks are compensation. If you replace them out of pocket, the calculator folds their annual value into the rate you need. Good news worth noting: self-employed health premiums are often deductible, and a Solo 401(k) lets you match yourself.
3. Unpaid time off. A salary pays you for holidays, vacation, and sick days. A contractor only earns while billing. We start from a full-time year of about 2,080 hours and subtract your time off, so the same income is spread across fewer paid hours — which raises the hourly rate you must charge.
How the number is built
We add your salary, the employer-side payroll tax, and the value of your benefits to get the total annual income your contract must produce. Then we divide by your realistic billable hours (weeks worked minus unpaid time off) to get an equivalent hourly rate. It's a break-even figure — the floor, not your goal. Most contractors add a margin on top for irregular work, admin time, and the risk of going without a safety net.
Frequently asked questions
How much more should a 1099 contractor charge? As a rule of thumb, 25–50% above the equivalent hourly salary — the exact gap depends on how rich the benefits were and how much time off you take. This calculator gives your specific break-even.
Do contractors really pay more tax? On payroll tax, effectively yes, because you cover both halves of FICA. But you also unlock deductions employees can't take, so your overall tax picture depends on your expenses. Our 1099 deductions guide covers the write-offs people miss.
What billable hours should I use? A full-time year is roughly 2,080 hours. Subtract every day you won't bill — vacation, holidays, and sick days — because unlike a salary, none of it is paid.
Related tools: Self-employed tax calculator · Quarterly tax calculator · Home office deduction calculator · Health insurance guide