W-2 to 1099 Rate Calculator
Going from a salaried job to contract work? Enter your current W-2 salary and benefits to see the hourly rate you would need to charge as a 1099 contractor just to break even, after self-employment tax, self-funded benefits, and the reality that you bill fewer hours than you work. Figures are for US tax year 2025.
Why salary divided by 2,080 is the wrong number
The quickest way to underprice contract work is to divide a salary by 2,080 hours and quote that as your rate. It ignores three expensive differences between a W-2 job and 1099 work:
- The full payroll tax. A W-2 employee pays 7.65% in FICA while the employer quietly pays the other 7.65%. A contractor pays the entire 15.3% self-employment tax themselves.
- Self-funded benefits. Employer health insurance and a 401(k) match are compensation you must replace out of pocket as a contractor.
- Fewer billable hours. A salary pays for about 2,080 hours; a contractor bills only the hours spent on client work, not the time on sales, admin, and gaps between projects.
How this calculator works
It computes the full economic value of your W-2 job (take-home pay plus the value of employer benefits), then finds the 1099 gross income whose after-tax value matches it, using the 2025 self-employment tax, federal brackets, the QBI deduction, and your state rate. Dividing that by your billable hours gives the rate you need to charge.
Use it as a floor, not a ceiling
The result is your break-even rate, the point where contracting pays the same as the job. In practice you should charge above it to account for unpaid time off, business risk, and the value you bring. To build a rate from your own income goal instead, use the freelance rate calculator, and to compare a specific offer side by side, use the 1099 vs W-2 calculator.
Frequently asked questions
How do I convert a W-2 salary to a 1099 hourly rate? +
Do not just divide the salary by 2,080. A contractor pays the full 15.3% self-employment tax, funds their own health insurance and retirement, and bills fewer hours than a salaried employee works. This calculator computes the W-2 job's full value (take-home plus employer benefits) and finds the 1099 gross income whose after-tax value matches it, divided by your billable hours.
How much more should a 1099 contractor charge than a W-2 salary? +
Once you account for self-employment tax, self-funded benefits, and lower billable hours, the equivalent contractor rate is usually 1.25x to 1.5x the naive salary-to-hourly figure. For example, a $100,000 salary is about $48/hour at 2,080 hours, but the matching contractor rate is often $60 to $75 per hour.
Why do contractors bill fewer hours? +
A salaried job pays you for roughly 2,080 hours a year regardless of how the time is spent. As a contractor, time on marketing, admin, proposals, and gaps between clients is unpaid, so you only bill a fraction of your working hours. This calculator lets you set your real billable hours, which raises the rate you need.
Should I include benefits in the comparison? +
Yes. Employer-paid health insurance and a 401(k) match are real compensation you lose as a contractor and must replace out of pocket. Adding their annual value to the W-2 side makes the comparison fair and raises the contractor rate you need to truly break even.
Is this tax advice? +
No. This is an educational estimate for tax year 2025 using federal rules and an effective state rate you provide. It does not model every credit, the AMT, local taxes, or full state brackets. Confirm important decisions with a qualified tax professional.
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