W-2 to 1099 Rate Calculator

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.