Self-employment tax takes 15.3% before income tax even enters the picture, and that is the part most new contractors forget to set aside. This tool works backward from your hourly rate to the number that actually lands in your account, plus what a salaried job would need to pay to match it.
This estimates taxes, not the whole picture. State income tax, retirement contributions and health premiums are not in this math.
Gross income is rate times billable hours times paid weeks. We subtract 15.3% self-employment tax (Social Security plus Medicare, both halves), income tax on your net profit, and business expenses. The employee-equivalent salary adds back the 7.65% employer FICA share so you can compare your take-home to a W-2 offer on equal footing.
Two numbers do all the heavy lifting here, and both come straight from federal payroll tax rules, not a rounded guess.
| What | Rate |
|---|---|
| Self-employment tax (12.4% Social Security + 2.9% Medicare) | 15.3% |
| Employer FICA gross-up used for the employee-equivalent salary | 7.65% |
Worked example on the defaults: $75 an hour times 40 billable hours times 48 paid weeks is $144,000 in gross income. Self-employment tax at 15.3% is $22,032. Income tax at the default 12% rate, applied to gross minus $6,000 in expenses, is $16,560. Total taxes come to $38,592, leaving net income of $99,408. Grossed up by the 7.65% employer FICA share, the employee-equivalent salary works out to about $107,643.
The IRS expects most self-employed people who will owe $1,000 or more for the year to pay estimated tax four times a year using Form 1040-ES, not just once at filing time. Skip a quarter and you can owe an underpayment penalty on top of the tax itself. Plenty of contractors solve this by moving a fixed percentage of every invoice into a separate account the day it clears, before the money feels spendable. If your income swings a lot month to month, recalculate partway through the year instead of locking in January's estimate for December.
Deciding whether 1099 pays enough usually leads to margin questions next. Try the profit margin calculator or the business valuation calculator, both free and on the same site.
As a 1099 worker you pay both sides: the 12.4% Social Security tax and the 2.9% Medicare tax. Employees only see half of that on their paystub because the employer absorbs the other half silently.
Subtract vacation, holidays and any unpaid gaps between contracts. Most full-time freelancers realistically bill 46 to 50 weeks, not 52.
It grosses up your take-home by the 7.65% an employer would pay on your behalf in a W-2 job. Useful when a hiring manager quotes you a salary and you want to know if going 1099 at a higher rate actually comes out ahead.
No, it's a planning estimate.
