A common rule of thumb says charge 25–40% more as a 1099 than your W-2 hourly equivalent. That range exists because the gap depends on benefits, state tax, and how many unpaid days you take.
Example: an $80,000 W-2 with $7,000 health value and a 4% match. Divide $80,000 by 2,080 and you get about $38.50/hour on paper. After taxes and benefits, the 1099 breakeven is often in the low-to-mid $50s per billable hour — not $38.50 × 1.3.
Find your exact breakeven rate
A simple way to quote
- Enter the W-2 salary and benefits you would leave behind.
- Set realistic unpaid days and business expenses.
- Read the “rate needed to match” number.
- Add a cushion for slow months and bad debt.
FAQ
Is the 30% rule accurate?
It is a rough starting point. Self-employment tax alone is about 15.3% on net profit (with half deductible). Benefits and unpaid time often push the true gap higher than 30%.
Should I quote hourly or a project fee?
Either works if you still check the annual take-home. Convert project fees into expected hours so you can compare against a salary.
Does QBI change the answer?
The simplified 20% qualified business income deduction helps many contractors, and this calculator includes it. High earners and some service businesses face phaseouts.