How the calculation works
We find the 1099 hourly rate that leaves you with the same money after tax as your W-2 job, plus the benefits you would have to pay for yourself.
The idea
First we work out what your W-2 salary leaves you after payroll tax, federal tax and state tax. Add any employer health cost and 401(k) match you would lose. Then we search for the contractor revenue that, after business costs, self-employment tax, federal tax and state tax, leaves exactly that amount. Divide by your billable hours to get the hourly rate.
Sources and 2026 figures
- Federal brackets and standard deductions: IRS Rev. Proc. 2025-32.
- Social Security wage base of $184,500: Social Security Administration.
- Self-employment tax: 15.3% on 92.35% of profit, half deductible. Additional Medicare tax of 0.9% above $200,000 single or $250,000 married.
- QBI deduction: 20% of qualified business income, limited to 20% of taxable income, and phased out between the IRS thresholds.
- California: Franchise Tax Board 2025 schedules and 2026 state disability insurance rate from EDD.
- New York: 2026 rates from the state estimated tax instructions, the 2025 tax computation worksheet for the benefit recapture, NYC resident rates and payroll items.
Assumptions and limits
- One job, the standard deduction, no other income, and the filing status you choose.
- Billable time defaults to 75% of working hours, because contractors rarely bill every hour. Many simple calculators assume 100%. The calculator has a switch that matches those settings.
- State tax on 1099 income does not subtract half of self-employment tax, which is the cautious choice.
- Not modeled: S-corporation elections, retirement contributions, self-employed health insurance deduction, local taxes beyond those named, and New York income above about $223,400 for recapture.
Test cases you can reproduce
| Case | Rate needed | Yearly revenue |
|---|---|---|
| $95,000 single, Texas | $67.47 | $97,162 |
| $95,000 single, California | $66.28 | $95,445 |
| $150,000 single, New York | $105.23 | $151,529 |
20 days off, 40 hours a week, 75% billable, QBI on, no benefits or costs.
With 100% billable time and QBI off, the Texas $95,000 case needs $53.20 an hour. That matches the result of a simple published cost-add-up formula to within a few cents once its 2025 figures are accounted for. Our default is higher because it assumes fewer billable hours.
Review status
This methodology has not yet been reviewed by a licensed tax professional. We will state here when it has.