How much more should a 1099 contractor make than a W-2 employee?

Usually 20% to 40% more gross income for the same money in hand, depending on the salary, the benefits it came with, and your business costs. In 2026, a $90,000 salary with $12,000 of benefits takes about $115,000 of 1099 income to match for a single filer with $6,000 of expenses.

How do I convert a salary to a contract hourly rate?

Work out the 1099 income that matches the salary once benefits and self-employment tax are counted, then divide by the hours you will actually bill, not 2,080. Billing 1,200 to 1,500 hours a year is common once admin and gaps between projects are counted.

Why do 1099 contractors pay more tax?

They pay both the employee and employer halves of Social Security and Medicare, 15.3% on 92.35% of net profit, instead of the 7.65% an employee pays. Half of that is deductible, and the qualified business income deduction offsets part of the difference.

Is 1099 or W-2 better?

Neither by default. A 1099 role pays off when the rate covers the extra tax, benefits and unbilled time, and you value the flexibility. A W-2 role is worth more than its salary suggests because of what the employer pays on your behalf.

1099 vs W-2: what salary equals your rate

By FreelanceCFO. Reviewed 24 September 2026.

Short answer

To match a W-2 salary as a 1099 contractor, you need roughly 20% to 40% more gross income, because you pay both halves of Social Security and Medicare and buy your own benefits. In 2026, a $90,000 salary with $12,000 of benefits takes about $115,000 of 1099 income to match, for a single filer with $6,000 of business expenses.

A salary and a contract rate that look equal are not. The employer on a W-2 quietly pays half of your Social Security and Medicare and usually some of your health cover. On a 1099, all of that moves to your side.

Where the gap comes from

The other half of FICA. An employee pays 7.65%. A self-employed person pays 15.3% self-employment tax on 92.35% of profit, then deducts half of it. IRS
Benefits. Health insurance, retirement match, paid leave. Put a dollar value on what the job includes.
Business costs. Software, equipment, insurance, a home office.
Partly offset by the qualified business income deduction, which can take up to 20% off the taxable part of freelance profit. It does not apply to wages.

The numbers

1099 income needed to match a W-2 salary, 2026
W-2 salary	With benefits worth	1099 income that matches it	How much more
$70,000	$12,000	$95,124	36%
$90,000	$12,000	$115,364	28%
$110,000	$12,000	$135,605	23%

Single filer, 2026 tax year, standard deduction, no state tax, $6,000 of business expenses on the 1099 side. "Matches" means the same money in hand after federal tax, FICA or self-employment tax, and replacing the benefits. Calculated with the same engine as the 1099 vs W-2 calculator, from Rev. Proc. 2025-32 and the SSA 2026 wage base.

Turning it into an hourly rate

A salaried year is about 2,080 paid hours, including holidays and vacation. A freelancer does not bill for all of them: finding work, admin and gaps between projects all come out. Divide the matching income by the hours you will actually bill.

Matching 1099 income:     $115,364
    
    Billing 1,500 hours:      115,364 / 1,500 = about $77 an hour
    Billing 1,200 hours:      115,364 / 1,200 = about $96 an hour
    
    Same salary as an hourly wage:  90,000 / 2,080 = about $43 an hour

That is why a contract rate that is roughly double the equivalent hourly wage is often a fair match, not a windfall.

Run your own numbers

The 1099 vs W-2 calculator takes your salary, benefits, expenses, filing status and state rate, and solves for the break-even 1099 income. Nothing you type leaves the page.

FreelanceCFO tracks this for you: runway, quarterly tax set-aside and who owes you money, on one screen. Free to start, no credit card.

Start free

Sources

Checked on 24 September 2026. Prices and features change, so follow the link before you rely on any of them.