Contract Rate vs Salary Calculator
Calculate the exact hourly 1099 contract rate required to equal or exceed a full-time W-2 salary, factoring in lost benefits, self-employment taxes, overhead, and billable hours.
W-2 Salary Replacement Model
Target 1099 Hourly Rate
$79.39
Replaces full W-2 value
Rule-of-Thumb Rate
$95.00
Salary / 1,000
Target Contract Billings
$142,908
15% profit buffer included
Extra SE FICA Tax
$7,268
7.65% employer share
Step-by-Step Worked Example
Calculation Steps:
How to Use This Calculator
- 1Enter your current or target W-2 annual salary.
- 2Enter the annual cash value of employer benefits (healthcare, 401k match, PTO).
- 3Specify your realistic target billable hours per year (typically 1,600 to 1,900).
- 4Input estimated annual contractor overhead (hardware, software, legal/insurance).
- 5Review your exact required hourly rate and compare against the rule-of-thumb rate.
Assumptions & Limitations
- Estimates are based on standard national averages and current prevailing construction materials and contractor rates.
- Actual trade bids may fluctuate according to local building code requirements, permit fees, and site topography.
- Always obtain multiple written bids from licensed, bonded, and insured contractors before commencing work.
Frequently Asked Questions
What is the "Salary / 1,000" rule of thumb?
A widespread industry heuristic suggests dividing your annual W-2 salary by 1,000 to find your hourly contract rate (e.g. \$100,000 salary = \$100/hr). This accounts for ~2,000 work hours with a ~2x multiplier to cover taxes, overhead, and unpaid leave.
Why must target billable hours be lower than 2,080?
As an independent contractor, you do not get paid for federal holidays, vacation, sick days, or time spent pitching new clients and managing invoices. 1,800 billable hours reflects a realistic 45-week year.
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