1099 vs W-2 Calculator
What contract rate actually matches a salary once payroll tax, benefits, and unpaid time off are counted.
The naive conversion, salary divided by 2,080, is $58 an hour and it is wrong, because it ignores the $13,399 of extra payroll tax you pay as both halves, the benefits you give up, and the weeks nobody pays you for. The break-even rate above accounts for all three. Federal only; state tax, business expenses, a possible QBI deduction, and retirement contributions all move the answer.
Worked example. A $120,000 salary divided by 2,080 hours is $58 an hour, and that number is misleading. As a contractor you pay both halves of payroll tax, buy your own health insurance, get no employer match, and earn nothing during time off. Against a $120,000 offer with $18,000 of benefits and $9,000 of insurance, the break-even rate is far above $58. The calculator solves for it directly.
Frequently asked questions
What multiple of salary should a contract rate be?
The common rules of thumb land somewhere between 1.3 and 1.5 times the hourly equivalent, but they are approximations of the specific costs modelled here. Compute yours rather than trusting the multiplier.
What costs do people forget?
Unpaid time off, health insurance, the employer half of payroll tax, and gaps between contracts. Retirement matching and payroll taxes alone often run 15 to 25% of salary.
Are there advantages to 1099 work?
Yes, and this does not price them: business expense deductions, a possible 20% qualified business income deduction, a solo 401(k) with much higher limits, and control over your schedule. They can be worth a great deal to the right person.
Is this federal only?
Yes. State income tax, local tax, and any state-level business taxes are excluded, as are business expenses that would reduce net profit. Treat it as a starting point for a conversation with an accountant.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.