Contract vs. Salary Rate Calculator (W-2 to 1099)

What hourly rate does a contract need to pay to match your salary offer?

Enter the salaried offer and what you would have to replace as a contractor. It finds the hourly rate that leaves you the same cash, shows how much each gap adds (self-employment tax, health cover, unpaid time off, bench weeks, the lost match, expenses), and tells you what a rate you were actually offered leaves you.

Planning arithmetic on numbers you type in. Not tax or financial advice.

1. The salaried offer and your contract assumptions

Salary offer ($ a year)

Target bonus (% of salary)

Stock or RSUs, cash value per year ($)

401(k) match (% of salary)

Employer-paid health coverage ($ a year)

Paid vacation and sick days a year

Paid holidays a year

Hours you work per week

Unbilled weeks a year between contracts

Business expenses as a contractor ($ a year)

Contract rate you were offered ($ per hour, 0 to skip)

2. Tax rates

Social Security rate, each half (%)

Medicare rate, each half (%)

Social Security wage base for the year ($)

Questions people ask

What hourly rate should a contract pay to match a salaried offer?

Not salary divided by 2,080. A contractor pays both halves of Social Security and Medicare tax, buys their own health cover, gets no paid vacation or holidays, loses weeks between contracts and replaces the retirement match. For a typical software salary that adds roughly 30% to 45% to the naive hourly figure. The tool shows each gap as its own step.

Why is self-employment tax not simply 15.3%?

It applies to 92.35% of net earnings, and the 12.4% Social Security part stops at the annual wage base while the 2.9% Medicare part does not. The tool nets this against the employee half of FICA you stop paying when you leave a W-2 job.

Does the comparison include income tax?

No. Income tax depends on state, filing status and deductions, and it is left out of both sides. This slightly favours the contractor, because half of self-employment tax is deductible and the qualified business income deduction may apply. Ask a CPA for the after-tax picture.

Why count unpaid vacation and gaps between contracts?

A salaried offer pays you through holidays and time off. A contract pays only for hours worked, so every unpaid week raises the rate you need on the weeks you do bill. Enter zero for any you do not expect.

What about corp-to-corp or an S corporation?

The tool models a sole proprietor or single-member LLC taxed as one. An S corporation can lower self-employment tax but adds payroll, reasonable-compensation rules and filing costs, so enter those as business expenses or ask a CPA.

Is this tax or financial advice?

No. It is arithmetic on numbers you type in. It does not know your state, your client's terms, worker classification rules or your own benefits. Have an advisor review a real offer before you sign.

Not decided

Income tax, state taxes, the qualified business income deduction, S corporation or corp-to-corp structures, whether the role would really be classified as contract work, the client's payment terms, liability insurance, unemployment eligibility, and benefits the tool does not list (tuition, pension, equity upside). The defaults are placeholders, not your offer: replace each with your own numbers and the current year's tax rates.