1099 vs. W-2 Rate Equivalent Calculator
Turn a W-2 salary into the 1099 hourly rate you need to break even, with self-employment tax, lost benefits, unpaid PTO, and business expenses priced in.
1099 vs. W-2 Rate Equivalent Calculator
Your W-2 details
Enter what you earn now as an employee. We add back the costs your employer covers so you can price a 1099 contract that breaks even.
Health insurance + 401(k) match + other benefits your employer pays.
40 hrs times 52 wks = 2080.
Vacation + sick + holidays. As a 1099 these become unpaid, so they reduce billable hours.
Liability insurance, software, home office, accounting, equipment.
A single flat rate applied to both paths. Leave 0 for federal-only.
Check your inputs.
Estimated take-home at the breakeven rate
By design these land close at the breakeven rate. That is the point: the higher gross rate is required, not a windfall.
2026 estimate for planning, not tax advice. Uses the standard deduction only (no itemizing or credits), shows QBI without income phase-outs or SSTB limits, models state as a single flat rate, and omits the 0.9% Additional Medicare surtax on high wages.
Why salary divided by 2080 is the wrong contractor rate
The fastest way to turn a salary into an hourly rate is to divide by 2080, the number of work hours in a standard year. It is also the wrong number for a contractor. That math assumes your income shows up with none of the support an employer quietly pays for around it, and that gap comes down to four costs nobody bills you for directly.
First, your employer covers half of your FICA, 7.65% of wages toward Social Security and Medicare, which a 1099 worker pays in full. Second, employer benefits like health premiums, the 401(k) match, and other perks go away, so you buy your own. Third, paid time off stops: as a contractor, the days you take off are days you cannot bill. Fourth, you now carry your own overhead, from liability insurance to software to accounting. Add all four back and the rate you actually need is well above the naive figure.
How to convert a W-2 salary to an equivalent 1099 rate
The clean way to price it is with a breakeven revenue target. Start with the salary you want to replace, add the annual value of the benefits you lose, add the extra employer half of FICA, and add your business expenses. That total is what a contract has to gross for you to end up where you were. Divide it by your billable hours after subtracting PTO, and you have the hourly rate that breaks even.
Take a $100,000 salary with $15,000 of benefits, roughly $8,900 of employer FICA, and $3,000 of expenses: a revenue target near $127,000. Plan on 15 paid days off (120 hours) against a 2,080-hour year and you are billing about 1,960 hours, which lands the breakeven rate around $65 per hour, well above the $48 the naive salary divided by 2080 math suggests. The premium and multiplier fields above show exactly how far apart the two rates sit for your numbers.
The real cost of self-employment tax and benefits in 2026
Self-employment tax is the single biggest reason contractors charge more. In 2026 it runs 15.3%: 12.4% Social Security on the first $184,500 of net earnings plus 2.9% Medicare with no cap, applied to 92.35% of your net profit. You get to deduct half of it above the line, and many contractors also claim the 20% Qualified Business Income deduction. This tool folds both into the take-home estimate.
Benefits and overhead fill in the rest. Individual health coverage often runs $7,000 to $15,000 a year, a typical 401(k) match is worth 3% to 6% of salary, and paid time off has a real dollar value once it stops being billable. Enter your own figures instead of guessing at a flat multiplier, and the breakeven rate reflects your situation rather than a rule of thumb.
1099 vs. W-2: which actually pays more?
At the breakeven rate the two take-home numbers land close together, and that is the honest answer: the contractor's bigger gross gets consumed by extra tax, self-funded benefits, and overhead. Charge above breakeven and 1099 pulls ahead, with more deduction flexibility on top. Charge below it and W-2 wins once you value the stability, the unemployment insurance, and the lack of admin work. Treat the multiplier as your floor, then decide how much margin the flexibility is worth to you.
This web tool is a fast, federal-first estimate for pricing a contract. For per-state withholding, full W-4 detail, and saved profiles that weigh a 1099 offer against a W-2 one side by side, download the Stub44 Salary Calculator app. You can also compare related scenarios with the Net to Gross Salary Calculator, the Second Job Take-Home Calculator, the State Relocation Take-Home Comparison, or check where a number lands with the income percentile calculator.
Frequently Asked Questions
Common questions about 1099 vs. w-2 rate equivalent calculator
How much more should a 1099 contractor charge than a W-2 employee?
A common rule of thumb is 25% to 50% more. A 1.25x multiplier is really the floor, since it barely covers the extra self-employment tax; 1.4x to 1.5x is closer to reality once you factor in health insurance, retirement, lost PTO, and business overhead. This calculator gives you the exact multiplier for your own numbers instead of a rough guess.
Why is the equivalent 1099 rate so much higher than my salary divided by 2080?
Because salary divided by 2080 ignores everything your employer quietly pays: their half of FICA (7.65%), your health insurance, the 401(k) match, and paid time off. As a contractor you cover all of that yourself out of your rate, plus your own business expenses, so the breakeven rate has to come out noticeably higher.
What is self-employment tax and how much is it in 2026?
Self-employment tax is how independent contractors pay into Social Security and Medicare. In 2026 it is 15.3%: 12.4% Social Security on the first $184,500 of net earnings plus 2.9% Medicare with no cap, charged on 92.35% of your net profit. W-2 employees only pay half (7.65%) because the employer picks up the rest.
Can I deduct part of my self-employment tax?
Yes. You can deduct one-half of your self-employment tax when you figure your adjusted gross income. It does not shrink the SE tax itself, but it does lower the income your federal income tax is calculated on. This calculator already builds that deduction into the 1099 take-home estimate.
Do 1099 contractors get the 20% QBI deduction?
Usually, yes. The 20% Qualified Business Income deduction lets many self-employed people write off up to 20% of their net business income, and recent tax law made it permanent. High earners in certain service fields run into phase-outs, which this simplified estimate does not try to model.
How do I account for unpaid time off as a contractor?
Enter the paid days off you get now as PTO. Contractors do not get paid vacation, so every day you take off is a day you cannot bill. The calculator subtracts those hours from your billable total, which pushes up the hourly rate you need to hit the same annual income.
Is 1099 or W-2 better for take-home pay?
It comes down to the rate. At the breakeven rate the two paths net roughly the same money: the contractor's bigger gross gets eaten by extra tax, benefits, and overhead. Charge above breakeven and 1099 pulls ahead, plus you get more deduction flexibility. Charge below it and W-2 wins once you put a value on the benefits and the stability.
Does this calculator include state taxes?
It is a federal-first estimate. You can enter a single flat state income tax rate that applies to both paths for a rough comparison, but it does not model 51 different state systems, local taxes, or state-specific rules like CA SDI. For a full state-by-state paycheck breakdown, use the Stub44 Salary Calculator app.