What does a 1099 contractor need to bill to match my W-2 salary?
See the yearly billing and hourly rate a contractor needs to end up as well off as an employee, after self-employment tax, income tax, expenses and the benefits an employer pays.
Filing statusAssumes no other income in the household.
WHAT A CONTRACTOR NEEDS TO BILL
$159,730/yr
To end up as well off as $145,000 of salary and $6,697 of employer-paid benefits, a 1099 contractor with $3,000 of expenses has to bill $159,730 a year, 1.10 times the salary. That is $83.19 an hour over 40 billable hours for 48 weeks. Self-employment tax takes $22,145 of it, against $11,093 of Social Security and Medicare tax as an employee.
Hourly rate
$83.19/hr
Times the salary
1.10×
Self-employment tax
$22,145
W-2 take-home
$110,374
UNDERSTAND YOUR RESULT
Where a contractor’s billing goes
Of $159,730 billed, $3,000 goes to expenses, $22,145 to self-employment tax and $17,514 to federal income tax, leaving $117,071: the employee’s $110,374 take-home plus $6,697 of benefits.
Side by side
| W-2 employee | 1099 contractor | |
|---|---|---|
| Pay before tax | $145,000 | $159,730 |
| Business expenses | — | $3,000 |
| Social Security and Medicare | $11,093 | $22,145 |
| Federal income tax | $23,534 | $17,514 |
| State tax | $0 | $0 |
| Left over | $110,374 | $117,071 |
| Benefits paid by employer | $6,697 | — |
| Total value | $117,071 | $117,071 |
Both columns come to $117,071 in value. The contractor pays both halves of Social Security and Medicare tax ($22,145 against the employee’s $11,093), the business expenses and the benefits; the 20% business-income deduction ($25,911) lowers federal tax.
What different hourly rates leave a contractor
| Hourly rate | Billed a year | Left over | Against the employee |
|---|---|---|---|
| $65 | $124,800 | $92,789 | −$24,281 |
| $75 | $144,000 | $106,136 | −$10,934 |
| $83 | $159,360 | $116,813 | −$257 |
| $85 | $163,200 | $119,472 | +$2,402 |
| $90 | $172,800 | $126,003 | +$8,932 |
| $105 | $201,600 | $145,595 | +$28,524 |
Billed for 40 hours a week over 48 weeks, a rate of $83.19 leaves the same $117,071 as the salary and benefits. Each row shows how far another rate is above or below that.
What moves the needle
Each row re-runs the calculation with one change. Click to apply.How it's computed
FORMULA
Employee take-home = salary − Social Security and Medicare tax − federal income tax − state tax
Target = take-home + benefits the employer pays that a contractor would have to replace
Contractor profit = billing − expenses; self-employment tax = 15.3% × 92.35% of profit (Social Security up to $184,500), half of it deductible
Federal tax = brackets on (profit − half of self-employment tax − standard deduction − 20% qualified business income deduction)
Required billing = the amount at which profit − self-employment tax − federal tax − state tax = target; hourly rate = billing ÷ (billable hours × weeks)
- Both people are assumed to buy the same insurance and retirement savings: the employer’s share of the cost is what the contractor has to add, so it is the amount entered as benefits. $6,697 is the 2024 national average employer share of a single-coverage health premium (AHRQ MEPS-IC); replace it with your own figure.
- Your salary is your only income, and a single filer takes the standard deduction. Solo 401(k) contributions, the self-employed health insurance deduction and estimated-tax timing are not modelled.
- The 20% qualified business income deduction applies below its 2026 income threshold ($201,750 single, $403,500 joint). Above it the deduction depends on the kind of business and the wages it pays, so this page leaves it out and the billing shown is higher than a qualifying business would need.
- Time off enters through the hourly rate: an employee is paid for holidays and vacation, a contractor for the 48 weeks billed. The expenses shown are an example, not a quote.
- Whether a worker is an employee or a contractor is decided by the facts of the relationship, not by what either side calls it. This page does not decide that.
WORKED EXAMPLE · SAMPLE NUMBERS
Employee: $145,000 − $11,093 Social Security and Medicare − $23,534 federal tax = $110,374 take-home; plus $6,697 of employer-paid benefits = $117,071. Contractor: billing $159,730 − $3,000 expenses = $156,730 profit; self-employment tax $22,145; federal income tax $17,514 after a $25,911 business-income deduction; left over $117,071 = the target. $159,730 ÷ (40 hours × 48 weeks) = $83.19 an hour.
SOURCES
[1]Topic no. 554, Self-employment taxInternal Revenue Service[2]Qualified business income deductionInternal Revenue Service[3]Rev. Proc. 2025-32: 2026 inflation-adjusted tax items (brackets, standard deduction, QBI thresholds)Internal Revenue Service, 2025[4]Independent contractor (self-employed) or employee?Internal Revenue Service[5]Health Insurance Benefits at Private Employers, Estimates from MEPS-Insurance Component: 2008-2024 (Research Findings #54)Agency for Healthcare Research and Quality, December 2025HSBuilt by Hussain Sehorewala · checked against worked examples · Sep 29, 2026
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Questions about this result
On the example on this page (single, $145,000 salary, $6,697 of employer-paid benefits, $3,000 of expenses) a contractor has to bill about $159,730, which is 1.10 times the salary. The contractor pays both halves of Social Security and Medicare tax, but the 20% qualified business income deduction takes back a large part of it. Change the benefits and expenses to your own numbers: they move the answer more than anything else.
The self-employed pay Social Security and Medicare tax on themselves: 15.3% of 92.35% of net profit, which is 12.4% for Social Security up to $184,500 of earnings in 2026 and 2.9% for Medicare with no limit. An employee pays half of that (7.65%) and the employer pays the other half. Half of self-employment tax is deductible when figuring income tax.
The employer’s half of Social Security and Medicare tax, a share of health insurance, any retirement match, and paid time off. In 2024 the average single-coverage premium at private employers was $8,486, of which employees paid $1,789, so employers paid about $6,697 (AHRQ). A contractor generally does not get unemployment insurance or workers’ compensation through a client either.
An employee is paid for holidays and vacation; a contractor is paid only for hours billed. The yearly billing needed is the same, but spread over fewer billable weeks or hours it makes the hourly rate higher. Use the hours you can actually bill, not the hours you work.
It depends on the facts, not the label. The IRS looks at behavioral control, financial control and the type of relationship. If the company controls how, when and where you work, you may be an employee whatever the contract says. This page compares the two; it does not decide which you are.
Solo 401(k) and health-insurance deductions, state taxes with brackets, other household income, the effect on future Social Security benefits, and above the qualified business income threshold, the deduction itself (the billing shown is then higher than a qualifying business would need).
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