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A contract's hourly rate always looks bigger than a salary — but you now pay both halves of payroll tax, buy your own benefits, and cover your own expenses. This brings the two offers down to the only number that matters: the cash you actually keep.
Nothing you type leaves your browser. This is an estimate, not tax advice — confirm your numbers with a CPA or enrolled agent.
The classic mistake is to multiply a contract rate by 2,080 hours and compare it to a salary. By that math an "$75/hour contract" looks like $156,000 — obviously better than a $100,000 job. But that number is a fiction. As a 1099 contractor you pay the employer's half of payroll tax too (a full 15.3% self-employment tax instead of the 7.65% an employee pays), you buy your own health insurance and retirement match, you cover your own software and equipment, and you only earn when you're actually billing — there's no paid vacation. Strip those away and the gap between "great rate" and "decent salary" often shrinks to almost nothing.
This calculator brings both offers down to the same honest figure — the cash you keep after tax, with both sides holding the same benefits — so they can be compared directly:
The employer benefits you'd give up aren't added to the salary side — instead they're subtracted from the contract side, as the cash a contractor must spend to buy the same coverage. That avoids double-counting and answers the real question: after you've replaced everything the job gave you, are you ahead? The headline number is that difference, and the three ledgers above reconcile to it line by line.
The most useful output is the break-even hourly rate — the rate at which the contract leaves you exactly as well off as the salary. It's the floor: charge less and the "freelance freedom" is costing you money; charge more and you're genuinely ahead. A widely cited rule of thumb is that a contractor needs to bill roughly 25–30% above the equivalent salaried hourly wage just to break even on taxes and benefits — and this tool shows you the exact figure for your own numbers instead of a rule of thumb.
It uses the verified 2026 self-employment-tax model (12.4% Social Security up to the $184,500 wage base, 2.9% Medicare with no cap, the 0.9% Additional Medicare surtax over your filing-status threshold, and the deductible half of SE tax). It deliberately leaves out the 20% Qualified Business Income (QBI) deduction a contractor may claim — a simplification that quietly favors the contract. It also doesn't try to price the things money can't: autonomy, client risk, irregular cash flow, or the security of a steady paycheck. Those belong in the decision too — this tool just makes sure the dollars are honest.
Three things eat the difference. First, self-employment tax: a contractor pays the full 15.3%, double the 7.65% an employee pays, because there's no employer to cover the other half. Second, benefits — health insurance, a retirement match, paid time off — that a salary quietly includes and a contractor must buy. Third, business expenses the employer used to absorb. Add them up and a rate that looks 50% higher often nets only a little more.
The annual dollar value of everything the job gives you that you'd otherwise pay for: the employer's share of your health-insurance premium (often $6,000–$20,000), any 401(k) match, and life or disability cover. If you'd buy your own marketplace health plan as a contractor, use that premium. Leave it at zero only if you genuinely get no benefits from the job.
Because it's already in the billable-hours number. A salary is paid whether you take three weeks off or none — but a contractor billing, say, 1,840 hours has already priced their vacation in by billing fewer hours. Adding a separate PTO line would double-count it. Lower your billable hours to reflect more time off and the contract's keep-figure drops accordingly.
Your combined effective federal + state income-tax rate. Because income tax applies to both a salary and contract profit, using the same rate on both sides keeps the comparison fair — it mostly cancels out, and the verdict is driven by the payroll-tax and benefits gap. The contractor side does get one income-tax break the tool includes: half of self-employment tax is deductible before the rate is applied.
No. Every calculation runs entirely in your browser — nothing you type is sent to a server or stored. The link in your address bar updates so you can bookmark or share a scenario, but it only contains the numbers you chose.
Keep going
See what a salary equals as a freelance rate, and the reverse.
Turn 1099 income into real take-home after expenses and taxes.
Find the realistic billable-hours number this comparison needs.