Free Contractor Rate Calculator
W-2 to 1099 Contractor Rate Calculator
Enter your W-2 salary and benefits. Get the equivalent 1099 hourly rate that leaves you break-even after self-employment tax, health insurance, PTO, and 401(k) match.
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✓ Full breakdown
How this calculator works
Every W-2 salary quietly comes with a stack of employer-paid benefits: half your Social Security and Medicare tax, health insurance, a 401(k) match, and paid time off. When you go 1099, all of that disappears. The base salary alone isn’t what you need to replace — you need to replace the full loaded cost your employer was paying.
This calculator adds all of that up, applies self-employment tax on the other side, and divides by realistic billable hours. What comes back is the hourly rate that leaves you financially break-even after the switch.
The formula, in plain English
- Start with base salary + bonus/equity value.
- Add employer FICA (7.65% of salary and bonus) — the employer’s half of Social Security and Medicare.
- Add employer health insurance contribution.
- Add employer 401(k) match (percentage of base salary).
- Add the value of PTO and paid holidays (salary ÷ 260 working days × PTO days).
- That sum is your true W-2 comp.
- On the 1099 side, gross-up for the full 15.3% self-employment tax you now owe on the employer side too, plus your business expenses.
- Divide by billable hours per year.
The result: the 1099 hourly rate that leaves you neither better nor worse off financially than your W-2 job.
Rules of thumb
For a rough gut check without a calculator: multiply your W-2 salary by 1.30 to 1.40 to get your target 1099 annual comp, then divide by 1,600 billable hours to get an hourly rate. A $100K W-2 role points to roughly $80–$88/hour as a 1099 contractor. A $200K role points to $160–$175/hour. This calculator gives you the precise number tuned to your specific benefits package, but the multiplier holds up remarkably well as a fast estimate.
What the calculator doesn't cover
- State income tax differences. Some states tax self-employment income at different rates than W-2 income; the calculator uses federal-level assumptions.
- S-Corp election benefits. Contractors who form an S-Corp can pay themselves a reasonable salary and take the rest as distributions, potentially reducing self-employment tax. Talk to a CPA.
- Utilization risk. If you can’t consistently bill your target hours, your effective rate drops. Contractors typically build in a buffer for this.
- Contract-to-perm scenarios. If the contract is a paid audition for a W-2 role, some contractors accept a lower rate. This calculator assumes long-term self-employment.
Frequently Asked Questions
How do I convert a W-2 salary to a 1099 hourly rate?+
Start with the W-2 salary, add the value of benefits your employer pays (health insurance, 401(k) match, employer FICA of about 7.65%), and add the cost of PTO and holidays you’ll lose as a contractor. Then divide by your actual billable hours per year. A common rule of thumb is that a $100K W-2 role is roughly equivalent to $80–$90/hour as a 1099 contractor once all the hidden costs are accounted for.
What is self-employment tax?+
Self-employment tax is the Social Security and Medicare tax that self-employed workers pay on their earnings. It’s 15.3% total (12.4% Social Security + 2.9% Medicare), of which the employer normally covers half (7.65%) for W-2 employees. As a 1099 contractor, you pay both halves. The self-employment tax alone means a $100K contractor keeps roughly $7,650 less than a $100K W-2 employee before any other differences.
How many billable hours should I assume per year?+
A full-time W-2 employee works ~2,080 hours per year (52 weeks × 40 hours). Contractors rarely bill all of that. Realistic billable hours after accounting for holidays, PTO, sick days, admin time, business development, and gap time between contracts are typically 1,500–1,800 hours per year for a well-utilized independent contractor. Below 1,500 hours means significant idle time; above 1,800 means very high utilization or no real time off.
Should I use gross salary or total comp for the W-2 side?+
Use base salary in the W-2 field and enter benefits separately in the dedicated fields. That way the calculator handles employer FICA, health insurance value, 401(k) match, and PTO as line items — which makes the break-even number more accurate and gives you a defensible breakdown to show a client when negotiating your rate.
What about equity, RSUs, and bonuses?+
Include your realized annual equity, RSU vesting value, and expected bonus in the “Bonus / Equity” field for the most accurate comparison. Contractors typically get none of these, so leaving them out understates the true rate you’d need to break even.
Are there tax advantages to being a 1099 contractor?+
Yes, and they can meaningfully offset the higher payroll tax burden. Contractors can deduct legitimate business expenses (home office, equipment, software, professional development), contribute much more to retirement through a Solo 401(k) or SEP-IRA (up to $70,000/year in 2026), and — with an S-Corp election — potentially reduce self-employment tax on distributions above a reasonable salary. Consult a CPA before assuming these apply to your situation.