CONTRACTOR RATE PLANNING · TAX YEAR 2026
1099 vs W-2 Hourly Rate Calculator
Find the 1099 billable hourly rate that can replace a W-2 salary, payroll taxes, benefits, paid leave and unbillable time.CONTRACTOR RATE STUDIO · TAX YEAR 2026
Build a rate that replaces the whole job.
Salary is only one part of the comparison. Add the payroll tax, benefits, leave and hours that disappear when you go contract.
01
Start with the W-2 offer
Use annual amounts before personal income tax.
02
Replace the benefits
Count only the costs you would actually take on.
2026 assumptions · Social Security wage base $184,500; employee FICA 7.65%; contractor SE tax uses 92.35% of profit and the 12.4% / 2.9% split.
RATE TO BREAK EVEN$87.27/hr
for each billable hour to match the W-2 salary plus the benefits you entered.
W-2 baseline $57.691.51× uplift
THE HIDDEN COMPENSATION
$145,980.00What the employer was paying
Salary $120,000.00Employer FICA $9,180.00Benefits $16,800.00
RATE ANATOMY
1,598 billable hrsHow the break-even rate is built
Salary after employee FICA$110,820.00W-2 take-home before income tax
Benefits to replace$16,800.00$9,000.00 health · $4,800.00 match · $3,000.00 other
Contractor self-employment tax$19,704.26At the required $139,454.29 annual profit
Half-SE deduction value−$2,167.47Tax value at 22% marginal rate
QBI deduction value−$5,702.49$25,920.43 deduction from taxable income; eligibility varies
Profit needed ÷ billable hours$139,454.29 ÷ 1,598 = $87.27/hr
COMPARE RATE OPTIONS
↗What different hourly rates leave you with
Net of benefits compared with W-2 salary after employee payroll tax.
Rate / hrAnnual profitAfter SE tax*Net of benefitsvs W-2
$57.69$92,192.31$84,368.73$67,568.73−$43,251.27
$66.35$106,021.15$97,024.04$80,224.04−$30,595.96
$75.00$119,850.00$109,679.35$92,879.35−$17,940.65
$87.27Break-even$139,454.29$127,619.99$110,819.99Level
$92.31$147,507.69$134,989.97$118,189.97+$7,369.97
$103.85$165,946.15$151,863.71$135,063.71+$24,243.71
* Includes the estimated value of the half-SE deduction and QBI deduction; income tax is left out of both sides.
The hidden costs are doing real work here.
At $87.27/hour, the contractor rate is 1.51× the salary-divided-by-paid-hours figure. This comparison does not price contract gaps, unemployment insurance, legal/admin costs or flexibility.
2,080 hours aren't all billable
Your W-2 salary covers paid leave and holidays. The contractor rate spreads income over the remaining working hours, then reduces them again for admin and sales time.
Paid2,080
→Worked1,880
→Billable1,598
The payslip hid part of the package
Your employer also paid payroll tax on top of salary. As a contractor you fund both halves of Social Security and Medicare, plus the benefits you elect to replace.
Planning estimate, not tax adviceThis simplified QBI estimate does not apply the taxable-income or wage/property phase-in limits. 2026 thresholds depend on filing status. Confirm eligibility and details with a qualified tax professional.
Questions before comparing offers
What 1099 rate matches a W-2 salary?
It depends on your benefits, leave and billable time. This model solves for the contractor profit that matches the W-2 salary plus the replacement benefits you entered.
How much extra payroll tax does a contractor pay?
Self-employment tax includes both Social Security and Medicare shares, applied to 92.35% of profit; half of the SE tax is deductible against income tax in this estimate.
Why not divide salary by 2,080?
That counts paid leave and public holidays as working hours. Contractors bill fewer hours, and quoting, invoicing and finding work reduce billable time further.
Does QBI make contracting better?
It can reduce taxable income by up to 20% for eligible income, but it does not reduce self-employment tax. Income limits and specified-service rules may restrict it.
Should I count the full cost of health insurance?
Only enter the amount you actually need to replace. Coverage through a spouse or another plan can make that cost very different.
What does this estimate leave out?
Contract gaps, unemployment coverage, legal and accounting expenses, jurisdiction-specific details and the personal value of flexibility. This is arithmetic, not tax advice.
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How this app works
Find the 1099 billable hourly rate that can replace a W-2 salary, payroll taxes, benefits, paid leave and unbillable time. Review assumptions, source notes, and any context-sensitive flags before relying on the result.