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1099 vs W-2 Calculator

A $75-an-hour contract sounds like more than an $80,000 salary — until the self-employment tax, the benefits you now fund yourself, and the hours you cannot bill arrive. Enter the W-2 package and your realistic billable time to find the exact 1099 rate that breaks even.

What 1099 rate matches your W-2 salary?

Three gaps separate a salary from a contract rate: the extra payroll tax (you pay both halves now), the benefits the employer carried (paid time off, 401(k) match, health insurance), and the hours you work but cannot bill. The calculator prices all three, then tests the contract rate you were offered against the break-even.

W-2 annual salary ($)

Base salary on the W-2 offer, before benefits.

Paid time off (days/year)

Vacation + holidays + sick days the W-2 includes. Valued at salary ÷ 260.

401(k) match (%)

Employer match on salary — money a contractor must save solo.

Employer health insurance ($/yr)

What the employer pays toward your premiums each year (often $6k–$16k).

Other benefits ($/yr)

Dental, vision, life and disability insurance, HSA seed money — employer-paid.

Billable hours per week

Hours clients actually pay for. 25–30 is typical for full-time freelancers.

Billable weeks per year

52 minus unpaid vacation, holidays, sick time, and gaps between contracts.

Annual business expenses ($/yr)

Software, equipment, insurance, home office — deductible, but you bill them through.

Offered 1099 rate ($/hr)

The hourly rate on the contract offer you want to test.

Your break-even 1099 rate$75.38/hrTo match $80,000/yr W-2 pay you need $106,290/yr on a 1099 ($75.38/hr × 1,410 billable hours). That is 1.96× the $38.46/hr W-2 equivalent.

Offered 1099 rate$70.00/hrOffered 1099 rate · $98,700/yr at 1,410 billable hrs

−$5.38per hour

Break-even 1099 rate$75.38/hrBreak-even 1099 rate · $106,290/yr gross needed

Enter your W-2 package and billable hours above to find your break-even 1099 rate.

How it works: benefits value B = salary ÷ 260 × PTO days + salary × 401(k) match + employer health + other benefits. Billable hours H = hours/week × weeks/year. The required net 1099 earnings P solve P × (1 − 15.3% × 92.35%) = salary × (1 − 7.65%) + B — i.e. the contract's after-payroll-tax value must equal the W-2's salary net of the employee's FICA half plus benefits. The break-even rate is R = (P + business expenses) ÷ H. Expenses are added after the tax math because they are deductible: SE tax applies to net profit only. Estimates, not tax advice — for the income-tax side (including the 20% qualified business income deduction many contractors get), see the 1099 vs W-2 guide.

How the 1099 vs W-2 math works

Comparing a salary to a contract rate is really three comparisons stacked on top of each other. Get any one of them wrong and the "better" offer flips.

The three gaps

1. The tax gap. A W-2 employee pays 7.65% in FICA tax; the employer quietly pays the other 7.65%. A 1099 contractor pays the full 15.3% self-employment tax on 92.35% of net profit — both halves, out of their own pocket. Half of it is deductible for income-tax purposes, which softens the blow, but the payroll-tax bill is still roughly double. 2. The benefits gap. Paid time off, the 401(k) match, and the employer's share of health premiums are worth roughly 15–30% of salary — money a contractor must replace from the contract rate. 3. The time gap. A salary covers 2,080 hours whether you are billing or not. A contractor only gets paid for billable hours: admin, marketing, and gaps between contracts are unpaid. Spread the same salary over 1,400 billable hours instead of 2,080 and the required rate jumps 49% before taxes or benefits enter the picture.

The formulas

benefits B = salary ÷ 260 × PTO days + salary × 401(k) match + employer health + other · billable hours H = hrs/week × weeks/yr · required net earnings P = (0.9235 × salary + B) ÷ 0.8587 · break-even rate R = (P + business expenses) ÷ H · W-2 hourly equivalent = salary ÷ 2,080

The 0.9235 is the salary net of the employee's 7.65% FICA half; the 0.8587 is 1 minus the 15.3% self-employment tax applied to 92.35% of net profit. Solving for P makes the contract's after-payroll-tax value exactly equal the W-2's take-home-equivalent value plus benefits.

Worked example: $80,000 salary vs a $70/hr contract

A W-2 offer pays $80,000 with 15 PTO days, a 4% 401(k) match, and $7,000/yr in employer health premiums. You can realistically bill 30 hours a week for 47 weeks, with $3,000/yr in business expenses. The contract offer is $70/hr.

1. Benefits value: $80,000 ÷ 260 × 15 = $4,615 (PTO) + $3,200 (match) + $7,000 (health) = $14,815/yr.

2. Required net 1099 earnings: (0.9235 × $80,000 + $14,815) ÷ 0.8587 ≈ $103,290/yr after payroll tax.

3. Break-even rate: ($103,290 + $3,000) ÷ 1,410 billable hours ≈ $75.38/hr — 1.96× the $38.46 W-2 hourly equivalent.

4. The verdict: the $70/hr offer falls short by $5.38/hr, about $7,590/yr at 1,410 billable hours. It would need to be $75.38/hr to truly match the W-2.

Where this comes in handy

Testing a contract offer: when a recruiter quotes an hourly 1099 rate against your current salary, run both — the headline rate almost never survives the three gaps.
Setting your freelance rate: start from the salary you want to replace, add your real benefits cost and billable hours, and quote the break-even as your floor — not your target.
Negotiating the switch: if an employer wants to convert your W-2 role to 1099, the pay raise calculator shows what raise the W-2 side would need — and this page shows what the contract side must pay.
Checking take-home reality: the take-home pay calculator runs the W-2 salary through income tax so you compare spendable dollars on both sides.
Pricing your real hourly cost: the true hourly rate calculator folds commute and unpaid hours into the W-2 side — pair it with this page for the full picture.
Converting hourly to salary first: the hourly to salary calculator turns any W-2 hourly quote into its annual equivalent before you convert it here.

1099 vs W-2 — frequently asked questions

What is the self-employment tax rate?

15.3% — 12.4% for Social Security (on net earnings up to the annual wage base, $184,500 for 2026) plus 2.9% for Medicare (no cap). It applies to 92.35% of your net profit, and you may deduct half of it when figuring income tax. A W-2 employee pays only 7.65% because the employer covers the other half.

How much more should a 1099 contractor charge than a W-2 employee?

The classic rule of thumb is 30–50% more than the equivalent W-2 hourly rate (salary ÷ 2,080). But that rule assumes you bill nearly every work hour. With realistic billable time — say 30 hours a week for 47 weeks — the true break-even often lands near 1.6–2.0× the W-2 hourly rate, because unbillable time alone multiplies the rate before taxes and benefits are counted.

Is a 1099 or W-2 better for taxes?

Contractors pay more payroll tax (the full 15.3% vs 7.65%) but often less income tax: business expenses are deductible, half the SE tax is deductible, and eligible contractors can claim the 20% qualified business income (QBI) deduction under Section 199A, which W-2 employees cannot. Whether the 1099 wins overall depends on your expenses, deductions, and bracket — run the numbers rather than assuming.

Can I deduct health insurance as a 1099 contractor?

Generally yes: self-employed people can deduct premiums they pay for themselves (and family) from income tax, up to their net self-employment profit. The deduction reduces income tax, not self-employment tax. The calculator's employer-health field captures what the W-2 side was paying for you.

Do 1099 contractors get overtime or unemployment?

Generally no to both. Contractors are bound by their contract, not wage-and-hour laws, so there is no mandated time-and-a-half past 40 hours — price long weeks into your rate instead. And contractors are not covered by state unemployment insurance, so build your own safety net: the emergency fund guide is a good starting point.

How many billable hours should I assume?

Be honest, not optimistic. Full-time freelancers typically bill 25–30 hours a week after admin, marketing, and client management, and lose several weeks a year to unpaid time off, holidays, and gaps between contracts. Using 40 hours × 52 weeks is the single most common way contractors underprice themselves.

Does the 20% QBI deduction apply to my 1099 income?

If you are a sole proprietor, single-member LLC, or independent contractor with qualified business income below the phase-out threshold, yes — Section 199A lets you deduct up to 20% of net business income from federal taxable income. It is now a permanent part of the tax code. The calculator leaves it out (it affects income tax, which varies by bracket); treat it as upside on the 1099 side.

Learn the method: the free how to compare a 1099 offer to a W-2 salary guide walks through the three gaps step by step — the 15.3% self-employment tax, valuing benefits like PTO and the 401(k) match, realistic billable hours, the QBI deduction, and a negotiation checklist — with a fully worked example.