Is a $60/hour contract really better than a $90,000 salary with benefits? Enter both offers and this calculator puts them side by side after 2026 federal, self-employment and state taxes, benefits and business costs. It then tells you the contract rate you'd need to break even.
is your breakeven 1099 rate ($119,172 a year at 1,880 billable hours)
A 1099 contract needs about 32% more than the W-2 salary to leave you equally well off. At your quoted rate you come out $4,429 behind as a contractor.
| Item | W-2 employee | 1099 contractor |
|---|---|---|
| Gross pay | $90,000 | $112,800 |
| Business expenses | — | -$3,000 |
| Federal income tax | -$9,782 | -$8,782 |
| Social Security + Medicare | -$6,885 | -$15,514 (self-employment tax) |
| State income tax + payroll programs | $0 | $0 |
| Health insurance you pay | (in pre-tax deductions) | -$6,000 |
| Your 401(k) savings (still yours) | $5,400 | — |
| Employer-paid benefits (health, match, other) | $10,600 | — |
| Total value to you | $83,933 | $79,504 |
Estimates for planning only. Not tax, legal or financial advice. Results use 2026 federal rates (IRS Rev. Proc. 2025-32) and the state tables listed below, and may differ from your actual withholding. Consult a qualified tax professional. See our disclaimer.
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W-2 side. Your salary goes through the same 2026 engine as our take-home pay calculator: federal brackets, the standard deduction, FICA (7.65%) and your state's income tax and payroll programs. Your own 401(k) contribution is treated as pre-tax savings. We then add the value of what your employer pays for: its share of health premiums, its 401(k) match and any other benefits you enter.
1099 side. Gross contract income minus business expenses is your net profit. You owe self-employment tax on 92.35% of that profit: 12.4% Social Security (up to the $184,500 wage base) plus 2.9% Medicare, with 0.9% more above $200,000 single. That's roughly double what an employee pays. You can deduct half of it, along with health insurance premiums you pay yourself, and most contractors also get the 20% qualified business income (QBI) deduction. Health insurance you buy is subtracted as a real cost.
Breakeven. We search for the hourly contract rate at which your 1099 take-home, after health costs, equals the W-2 take-home plus benefit value. Billable hours matter a lot. Contractors aren't paid for holidays, vacation, sick days or time spent finding clients. 2,080 hours minus 4 weeks off is 1,920, and many freelancers bill only 1,500–1,800.
The default result compares a $90,000 W-2 job in Texas (employer pays $7,000 of health premiums and a 4% match) with a $60/hour contract at 1,880 billable hours, $3,000 of expenses and $6,000 a year of self-paid health insurance. The contract grosses $112,800, but after about $15,514 of self-employment tax and the cost of benefits, the breakeven rate is about $63.39/hour. That's roughly 32% more than the salary's hourly equivalent of $43.27.
Single filer in Texas, employer pays $7,000 of health premiums plus a 4% match, contractor bills 1,880 hours with $3,000 of expenses and $6,000 of health insurance.
| W-2 salary | Salary per hour (2,080 h) | Breakeven 1099 rate | Premium needed |
|---|---|---|---|
| $50,000 | $24.04 | $39.85 | 50% |
| $75,000 | $36.06 | $54.70 | 37% |
| $100,000 | $48.08 | $69.18 | 30% |
| $150,000 | $72.12 | $98.01 | 23% |
This is why the common advice is to charge 1.25× to 1.5× the salary's hourly equivalent, and more if you'll have gaps between clients.
Last updated . Data vintage: 2026 federal tables.
Usually 25% to 50% more than the salary's hourly equivalent, sometimes more. Contractors pay both halves of Social Security and Medicare, buy their own benefits and aren't paid for time off. Use the breakeven rate above for your situation.
15.3% of 92.35% of your net self-employment earnings: 12.4% Social Security up to the $184,500 wage base plus 2.9% Medicare, with an extra 0.9% above $200,000 for single filers. You can deduct half of it.
Most do. The qualified business income deduction can be up to 20% of net business income. Above $201,750 of taxable income ($403,500 married filing jointly) limits apply to specified service businesses.
Generally yes, if you expect to owe $1,000 or more. Estimated payments are due in April, June, September and January using Form 1040-ES.
Not freely. Whether you're an employee depends on how much control the company has over your work. Misclassified workers can lose overtime, benefits and tax protections.