What 1099 rate equals a $100,000 salary?
Line by line: the job and the contract that matches it
The table shows where the money goes in each case for the default example. Both columns leave you with the same take-home pay and the same retirement savings; the contract has to bill more to cover what the employer used to pay.
| Per year | W-2 job | 1099 contract |
|---|---|---|
| Gross pay or billings | $100,000 | $120,441 |
| Social Security and Medicare | $7,650 | $16,340 |
| Federal income tax | $11,850 | $7,801 |
| State and local income tax | $0 | $0 |
| Business expenses | $0 | $4,800 |
| Health insurance you pay | $0 | $7,000 |
| Retirement savings | $10,000 | $10,000 |
| Take-home pay | $74,500 | $74,500 |
| Paid or billable hours | 2,080 | 1,410 |
On top of the salary, the employer also pays $7,650 of payroll tax, plus federal and state unemployment tax. The contractor pays the full 15.3% self-employment tax instead and loses unemployment coverage.
Break-even 1099 rates by salary
Same assumptions as the default example (Texas, single filer, $7,000 health coverage, $4,000 match, 5 paid weeks off, 30 billable hours a week, $400 of monthly expenses).
| W-2 salary | Per paid hour | Break-even 1099 rate | Difference |
|---|---|---|---|
| $60,000 | $28.85/hr | $58/hr | +99% |
| $80,000 | $38.46/hr | $72/hr | +86% |
| $100,000 | $48.08/hr | $86/hr | +78% |
| $125,000 | $60.10/hr | $104/hr | +72% |
| $150,000 | $72.12/hr | $121/hr | +68% |
| $200,000 | $96.15/hr | $156/hr | +62% |
The gap is widest at lower salaries, because benefits such as health insurance cost about the same at any pay level and make up a larger share of a smaller salary.
The same $100,000 job in different states
| State | W-2 take-home | Break-even 1099 rate |
|---|---|---|
| Texas | $74,500 | $86/hr |
| Florida | $74,500 | $86/hr |
| California | $70,147 | $86/hr |
| New York | $69,994 | $86/hr |
| Illinois | $69,992 | $86/hr |
| Pennsylvania | $70,430 | $87/hr |
| Georgia | $70,558 | $86/hr |
| Ohio | $72,352 | $84/hr |
State income tax applies on both sides, so it lowers the W-2 take-home and raises the contract rate needed to match it. Each state page shows its brackets and rules.
Going the other way: what a contract rate is worth
If you already have a 1099 offer, set the calculator’s “Start from” to “1099 rate → equal W-2 salary”. With the default benefits and 30 billable hours a week, a $75/hr contract in Texas is worth about $85,224 as a salary. A W-2 offer above that pays more once taxes, benefits and time off are counted; below it, the contract pays more.
Why the contract rate has to be higher
Salary is only part of what an employer spends on a job. In June 2026, benefits made up 30.0% of employer compensation costs in private industry and 31.5% for full-time workers, according to the Bureau of Labor Statistics. Paid leave alone accounted for 8.1% of full-time compensation. A contractor replaces those costs out of billings:
- Payroll tax. The employer pays 7.65% on top of salary (6.2% Social Security up to $184,500 plus 1.45% Medicare). A contractor pays both halves as self-employment tax: 15.3% on 92.35% of profit, half of it deductible.
- Benefits. Health coverage and the 401(k) match become costs the contractor pays, though premiums and retirement contributions are deductible.
- Time. Paid time off becomes unbilled weeks, and admin, sales and gaps between clients are unbilled hours. That is why the calculator asks for billable hours, not hours worked.
- Costs. Software, equipment, insurance and accounting move from the employer to you.
Against that, the contractor gets the 20% qualified business income deduction and can deduct business expenses, health premiums and a larger retirement contribution through a solo 401(k) or SEP IRA. The calculator counts both sides.
Who pays what
| Tax (2026) | W-2 employee pays | Employer pays | 1099 contractor pays |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | 12.4% of 92.35% of profit |
| Medicare | 1.45% | 1.45% | 2.9% of 92.35% of profit |
| Additional Medicare (over $200,000 single) | 0.9% | None | 0.9% |
| Federal unemployment (FUTA) | None | 6.0% of first $7,000, less a credit of up to 5.4% | None (no coverage) |
Social Security applies only up to the $184,500 wage base in 2026, for both employees and the self-employed.
What the comparison leaves out
Equity, unemployment insurance, workers’ compensation and other protections that come with employment are not priced in. If a job offers stock or other hard-to-value benefits, the real break-even rate is higher.
Classification also matters. Whether you are an employee or a contractor depends on the working relationship, not the paperwork: the IRS weighs behavioral control, financial control and the type of relationship, and either side can ask for a ruling on Form SS-8. The Department of Labor applies its own test for minimum wage and overtime.
Already contracting? Use the freelance rate calculator to set a rate from your own take-home target, plan payments with the quarterly estimated tax calculator, or read what 1099 contractors owe.
Frequently asked questions
How much more should a 1099 contractor charge than a W-2 employee?
It depends on benefits, paid time off and billable hours. In the salary table on this page ($60,000 to $200,000), the break-even rate is 62% to 99% more per hour than the salary divided by 2,080 hours. With this page’s defaults ($100,000 salary, $7,000 health coverage, $4,000 401(k) match, 5 weeks paid time off, 30 billable hours a week), the break-even contract rate is $86/hr versus $48.08/hr on salary, 78% more.
What W-2 salary is a $75/hr 1099 contract worth?
With the same benefits and time off as above and 30 billable hours a week, $75/hr is worth about $85,224 a year as a W-2 salary in Texas. Set the calculator’s “Start from” to “1099 rate → equal W-2 salary” to test your own offer.
Why isn’t a 1099 rate just the salary divided by 2,080?
Because 2,080 hours (40 hours × 52 weeks) includes paid holidays, vacation and non-billable work. A contractor pays the employer’s 7.65% share of payroll tax, buys health insurance, funds retirement without a match and is paid only for billable hours.
Is the employer’s share of payroll tax really my cost?
In effect, yes. As a W-2 employee, your employer pays 6.2% Social Security and 1.45% Medicare on top of your salary. As a contractor you pay both halves as self-employment tax (15.3% of 92.35% of profit), though half of it is deductible for income tax.
Does this include the QBI deduction?
Yes. The contractor side applies the 20% qualified business income deduction under the 2026 thresholds, which partly offsets the extra payroll tax. For consulting, law, accounting, health and other “specified services”, the deduction phases out above $201,750 of taxable income ($403,500 married filing jointly); tick the box in the calculator if that applies.
Can a contractor deduct health insurance?
Usually. Self-employed people can deduct premiums for themselves and their family as an adjustment to income (IRS Form 7206), as long as they were not eligible for an employer-subsidized plan through their own or a spouse’s job that month. The calculator applies this deduction.
Do contractors get unemployment insurance?
Generally not. Employers pay federal unemployment tax (6.0% on the first $7,000 of each employee’s wages, usually reduced by a credit of up to 5.4% for state unemployment tax) and state unemployment tax, and employees can claim benefits after a layoff. Independent contractors are not covered, so the break-even rate should leave room for a cash buffer.
Who decides whether I’m a contractor or an employee?
The working relationship does, not the contract title. The IRS looks at behavioral control, financial control and the type of relationship, and either side can ask the IRS for a ruling on Form SS-8. The Department of Labor applies its own test for minimum wage and overtime.
Does the comparison include a bonus or other benefits?
Yes. Enter a cash bonus with the salary (it is taxed like salary) and the yearly value of other benefits you would have to replace, such as life and disability insurance or HSA contributions. Equity and benefits that are hard to price are left out.
Sources
- Topic no. 554, Self-employment tax - IRS
- Topic no. 751, Social Security and Medicare withholding rates - IRS
- Topic no. 759, Form 940, Employer's annual federal unemployment (FUTA) tax return - IRS
- Independent contractor (self-employed) or employee? - IRS
- About Form SS-8, Determination of worker status - IRS
- Qualified business income deduction - IRS
- About Form 7206, Self-employed health insurance deduction - IRS
- Rev. Proc. 2025-32 (2026 tax brackets and standard deduction) - IRS
- Notice 2025-67 (2026 retirement plan limits) - IRS
- 2026 Social Security changes (wage base) - Social Security Administration
- Employer Costs for Employee Compensation, June 2026 - U.S. Bureau of Labor Statistics
- Misclassification of employees as independent contractors under the FLSA - U.S. Department of Labor
Tax figures: tax year 2026. How the numbers are calculated: methodology.
Estimates for educational and planning purposes only. HourFloor does not provide tax, legal or financial advice. Verify your numbers with a qualified tax professional.