Going contract? Find the hourly rate you need to charge to actually match a salaried job — after self-employment tax, unpaid time off, and the benefits you now pay for yourself.
2,080 is a full year with no time off. Most contractors bill 1,600–1,900 after vacation, gaps between clients, and admin time.
Add this free 1099 vs w-2 calculator to your own website — just copy and paste the code below.
A contract role that pays the same headline number as a salaried job is a significant pay cut. As a 1099 contractor you take on costs an employer used to absorb:
Once these are added up, contractors typically need 25–50% more gross than the equivalent salary just to break even.
It is not all cost. Contractors can deduct legitimate business expenses (home office, equipment, software, mileage), may qualify for the qualified business income deduction, and can often contribute far more to a retirement plan such as a SEP-IRA or Solo 401(k) than an employee can. Those advantages are not modelled above, so treat the rate this calculator gives you as a floor, not a ceiling.
How much more should a 1099 contractor charge than a W-2 employee?
A common rule of thumb is 25–50% more, but the exact figure depends on your state, how much time off you take, and what you pay for health insurance. The calculator above works out your specific number instead of guessing.
How do I convert a salary to an hourly contract rate?
Do not just divide by 2,080. Divide the grossed-up amount by your realistic billable hours — usually 1,600 to 1,900 a year once vacation, admin, and gaps between clients are removed.
What is self-employment tax?
It is the contractor version of FICA: 12.4% Social Security plus 2.9% Medicare on 92.35% of net earnings. Half of it is deductible against income tax, which this calculator accounts for.
Is 1099 or W-2 better?
Neither is universally better. W-2 offers benefits, paid leave, and employer-paid payroll taxes; 1099 offers higher rates, deductible business expenses, and flexibility. Compare total value, not headline pay.