How do I convert a 1099 hourly rate to a W-2 salary?

Multiply the 1099 rate by billable hours, subtract business costs, health insurance, self-employment tax, and unpaid downtime, then compare the remaining value with W-2 salary plus benefits.

Is a 1099 rate always worth more than a W-2 salary?

No. A high contractor rate can still be weaker if billable hours are low, expenses are high, benefits are missing, or the contract has unpaid gaps.

Salary conversion

W2 Salary Equivalent Calculator

Convert a 1099 hourly rate into a rough W-2 salary equivalent by accounting for billable hours, health insurance, business expenses, self-employment tax, PTO, and employer benefits.

Open 1099 to W-2 mode Try an $85/hr example

How the W-2 Equivalent Estimate Works

Annualize the Contractor Rate

Start with contractor hourly rate multiplied by billable hours per week and working weeks per year. Avoid using 2,080 hours unless the contractor truly bills 40 hours every week.

Subtract Contractor Costs

Estimate health insurance, software, equipment, accounting, licensing, legal, workspace, and other annual business costs before comparing take-home value.

Compare Against W-2 Compensation

W-2 value includes salary, paid holidays, PTO, employer retirement match, subsidized insurance, and reduced administrative burden.

Fast Rule of Thumb

A contractor rate often needs to be materially higher than the simple hourly version of a W-2 salary. For example, a $100,000 salary divided by 2,080 hours is about $48/hr, but an equivalent 1099 rate may need to be much higher after tax, benefits, expenses, and downtime.

Formula to sanity-check an offer

W-2 equivalent value = contractor gross income - business costs - contractor health insurance - estimated self-employment tax - unpaid downtime adjustment.

What to Include Before Accepting an Offer

Category	W-2 Value	1099 Adjustment
Paid time off	Paid vacation, holidays, sick time	Usually unpaid unless included in rate
Health insurance	Often subsidized by employer	Often paid directly by contractor
Retirement	Possible employer match	Self-funded contributions
Taxes	Payroll withholding	Estimated taxes and self-employment tax planning

FAQ

What is a W-2 salary equivalent?

It is a rough estimate of what a contractor arrangement feels like when compared with an employee salary and benefits package.

Can a contractor rate be converted exactly?

No. Benefits, tax situation, deductions, risk tolerance, billable hours, and state rules vary. Use a range, then speak with a qualified professional for major decisions.