Your W-2 take-home today
What lands in your account from the day job, after federal + state + FICA. The number you'd need to replace.
— / year
Per month
—
Effective tax rate
—
Going Freelance
The W-2 salary you'd quit and the 1099 hourly rate that replaces it aren't the same number — not even close. You now pay both halves of FICA, fund your own health insurance, lose the employer 401(k) match, and don't get paid for sick days. This page works out the actual break-even rate, and the rate you should aim for to come out ahead.
The hidden cost of going solo
Benefits your W-2 employer paid for that you now fund yourself, plus the employer half of FICA (Social Security + Medicare).
— / year you must replace
Health insurance
—
Lost 401(k) match
—
Other benefits (PTO, etc.)
—
Extra SE tax (employer half)
—
Break-even revenue
The 1099 revenue you'd need to net the same as your W-2, after SE tax + self-paid benefits.
— / year billed
SE tax at this revenue
—
Federal + state tax
—
Net take-home after benefits
—
Your hourly rate
Break-even, plus tiers if you want to actually come out ahead. Based on the hours you actually bill (not the hours you're "working" — admin doesn't pay).
— / hr (break-even)
+20% premium
—
+50% premium
—
Annual billable hours
—
The plan, at a glance
—
What's next?
Why the rate is so much higher than your salary ÷ 2,000
Naïve math says a $90k salary = $45/hr (90k ÷ 2,000 hours). The real break-even is closer to $75/hr. The gap comes from four places:
- SE tax (~$10k extra) — you pay both halves of FICA. Your W-2 employer was paying the other half quietly.
- Health insurance (~$9k) — your employer's plan was a chunk of compensation you never saw.
- Retirement match (~$3.6k) — gone.
- Unpaid time — admin, sales, downtime, sick days, holidays. The 48 weeks × 30 hrs assumption gives you 1,440 billable hours, not 2,000.
Industry rule of thumb: 2× your effective hourly W-2 rate. This page does the actual math instead of the rule of thumb.
What this plan doesn't model
- Business expenses — Schedule C deductions reduce your taxable income. If you have meaningful expenses (home office, equipment, software, mileage), your effective rate is lower than this estimate.
- S-Corp election — at higher revenue (~$80k+ profit), an S-Corp can save a few thousand a year on SE tax. Adds bookkeeping overhead.
- QBI deduction — Section 199A lets many self-employed take 20% off taxable income. Significant savings; not modeled here.
- SEP-IRA / Solo 401(k) — you can shelter up to 25% of net SE income tax-deferred. More room than a W-2 401(k).
Once you get past the "is this even viable?" stage, talk to an accountant about all four — they typically pay for themselves the first year.