How this calculator works
Most rate advice runs forward: pick a number, hope it's enough. This runs backward, through the same 2026 tax chain our1099 vs W-2 calculator uses. Nothing is hidden. This is exactly what the engine does:
- Start from the target. Either the annual take-home you name, or (if you're replacing a job) the full value of that W-2 package: its after-tax take-home plus the dollar value of the employer health contribution, 401(k) match and paid time off you stop receiving.
- Solve for the profit that survives tax. The engine searches for the Schedule C profit whose take-home first reaches your target, running the full chain at every step: self-employment tax (15.3% on 92.35% of profit, Social Security capped at the $184,500 wage base for 2026, plus 0.9% Additional Medicare above your filing status's threshold), the deductible half of that SE tax, the §199A qualified business income deduction capped by the §199A(a) overall limit, the 2026 federal brackets after your standard deduction, and your state's flat effective rate.
- Add your expenses back. Business expenses are deductible, so they never reach your pocket, but you still have to invoice for them. Required revenue = required profit + expenses.
- Divide by the hours you'll really bill. Weeks worked × hours per week × utilization. Unpaid weeks off and unbilled hours are the whole point: a salary pays through them, a rate does not.
- Round the rate up, then recompute forward. The rate is ceiled to your increment ($5 by default), never down. The take-home shown is then recalculated from that rounded rate, so the number you see is the one the rate actually produces, and it is always at or above your target.
The last step matters more than it looks. A "what should I charge" tool that rounds to the nearest dollar can hand you a rate that lands below the target you just typed in. This one cannot.
Why your rate has to clear your old hourly wage
As a 1099 you pay both halves of FICA and buy your own benefits, so your rate has to beat your old hourly wage by more than most people expect. Replacement mode turns that into a number.
A $100,000 salary in Georgia (single filer, average employer health contribution of $7,885, 4% match, 15 days PTO) is worth $94,544 a year once you value the package honestly: $76,890 of after-tax take-home plus $17,654 of benefits. The naive hourly equivalent (salary ÷ 2,080) is $48.08. But to match that package on 1099 terms at 48 working weeks, 40 hours a week, 85% utilization and $2,000 of expenses, you need$80/hour. That is a 66% premium, and every point of it is accounted for: self-employment tax, the benefits that stopped being free, four unpaid weeks, and the 15% of your hours that no client pays for.
A worked example, every step shown
Single filer in Georgia (2.29% effective state rate), target take-home $90,000, working48 weeks × 40 hours at 80% utilization with$6,000 of annual business expenses, rounding to $5. To reproduce it in the calculator above, set utilization to 80% and expenses to $6,000; the consulting flavor starts at 65% and $8,000.
- Billable hours: 48 × 40 × 0.80 =1,536 hours.
- Solve for profit. The least Schedule C profit whose take-home reaches $90,000 is $121,507.22. Checking it forward: SE tax base = 92.35% × $121,507.22 = $112,211.92; SE tax = 12.4% + 2.9% of that = $13,914.28 + $3,254.15 =$17,168.43; half of it, $8,584.22, is deductible. Qualified business income = $121,507.22 − $8,584.22 = $112,923.00. Taxable income before QBI = $112,923.00 − $16,100 standard deduction = $96,823.00. The QBI deduction is the lesser of 20% × $112,923.00 = $22,584.60 and 20% × $96,823.00 = $19,364.60, so$19,364.60. The taxable-income cap binds, as it does for almost every pure-1099 filer. Taxable income = $77,458.40. Federal tax = $1,240 + $4,560 + 22% × $27,058.40 =$11,752.85. State tax = 2.29% × $112,923.00 =$2,585.94. Take-home = $121,507.22 − $17,168.43 − $11,752.85 − $2,585.94 = $90,000.00 exactly.
- Add expenses: $121,507.22 + $6,000 =$127,507.22 of revenue to invoice.
- Divide: $127,507.22 ÷ 1,536 =$83.0125/hour.
- Round up: to the nearest $5 →$85.00/hour ($680/day at 8 billable hours). Note what rounding down would have cost: at $83/hour the year produces $89,987.06, $12.94 short of the target.
- Recompute forward at $85/hour. Revenue = $85 × 1,536 = $130,560. Profit = $124,560. SE tax base = $115,031.16; SE tax = $17,599.76. QBI income = $115,760.12; QBI deduction = $19,932.02; taxable income = $79,728.10; federal tax = $12,252.18; state tax = $2,650.91. Take-home = $92,057.15, comfortably above the $90,000 target, and that is the figure the tool displays.
Every number above was computed by the engine and checked by hand against IRS mechanics; the test suite asserts the same round trip for a range of targets, filing statuses and states.
Squaring this with the 1099 vs W-2 calculator
The two tools share one engine, so they agree exactly when you give them the same inputs: put $85/hour, 48 weeks, 40 hours, 80% utilization, $6,000 expenses and $0 self-paid health into the 1099 vs W-2 calculator and it reports the same $92,057.15 take-home.
Two differences will otherwise make the numbers diverge, and both are deliberate. This tool defaults to 48 working weeksrather than 52, because unpaid time off is part of an honest rate. And it does not model a self-paid health premium at all, while the 1099 vs W-2 calculator has an explicit input for one; here, your premium belongs in the take-home target you type, not in business expenses (see the limitations below).
Frequently asked questions
How do I calculate my consulting hourly rate?
Work backward, not forward. Start from the annual take-home you actually want, add back the federal, state and self-employment tax you will owe on it, add your business expenses, then divide by the hours you will genuinely bill, not the 2,080 hours in a work year. This calculator does exactly that: it solves for the Schedule C profit whose after-tax remainder equals your target, adds your expenses to get the revenue you must invoice, and divides by weeks × hours × utilization.
What is the difference between a consulting rate and a contractor rate?
The tax math is identical: both are 1099 self-employment income on Schedule C. What differs are the assumptions. Consulting work carries more unbilled time (sales, proposals, scoping, gaps between projects) and higher overhead, so it starts at 65% utilization and $8,000 of annual expenses here. Contract work at a steadier cadence bills a larger share of its hours, so it starts at 85% and $2,000. Those are starting points, not facts about you: change them and the rate changes.
Why does the calculator assume I bill less than 100% of my hours?
Because almost nobody bills every hour they work. Time spent on proposals, invoicing, bookkeeping, marketing, and the gaps between engagements is real work that no client pays for. If you set utilization to 100% you get naive full-billing math, and your rate comes out low enough that the shortfall shows up later as a year that felt busy but paid badly.
Why do unpaid weeks off change my rate so much?
A salary keeps paying while you are on holiday or sick; a rate does not. The default here is 48 working weeks (four weeks unpaid), which means the same annual revenue has to come from 48 weeks instead of 52. That alone raises the required rate by 8.3%: the same total spread over 1,536 billable hours instead of 1,664.
How is this different from the "multiply your salary by 1.5" rule of thumb?
Rules of thumb hide the reason for the markup, so they break when your situation is not the average one. This tool computes the markup instead of assuming it: from your filing status, your state, your expenses, your unpaid weeks and your utilization. Replacing the $100,000 Georgia salary in the example below takes $80/hour against a naive $48.08/hour wage: a 66% premium, not a memorised 50%. In a no-income-tax state, or at higher utilization, it would be smaller.
What should I charge as a freelancer on a 1099?
Whatever rate clears your target after self-employment tax. As a 1099 freelancer you pay both halves of Social Security and Medicare (15.3% self-employment tax on 92.35% of your profit, versus 7.65% withheld from a paycheck) and you buy your own time off. That is why a freelance hourly rate has to sit well above the salary-divided-by-2,080 figure it is usually compared against.
Does this calculator include health insurance or retirement savings?
No, and deliberately. Retirement contributions are money you keep rather than spend, and they lower your taxable income (a genuinely different question that deserves its own tool). Health premiums are not a Schedule C expense either; they are an above-the-line deduction under IRC §162(l) that does not reduce your self-employment tax base. Adding either to the "business expenses" field would produce a wrong number, so the honest move is to build them into the take-home target you type in. In "replacing a W-2 job" mode the employer health contribution you are giving up is already counted in the package value.
Why is the rate rounded up rather than to the nearest $5?
Because rounding down would defeat the purpose. In the worked example the exact answer is $83.01/hour; quoting $83 leaves you $12.94 short of your target over the year. The rate is always ceiled (to $5 by default, and you can change the increment) and the take-home shown is then recomputed forward from that rounded rate. The figure on screen is what the rounded rate actually produces, never the raw solve.
What this calculator does not do
Assumptions are not facts. Utilization, weeks worked, hours and expenses are your starting assumptions, and the defaults are editorial judgement, nothing more. They carry no source citation and no authority, unlike every tax constant in the engine, which names the document it came from and the date it was checked. Change them until they describe your year.
- Retirement contributions are out of scope. A solo 401(k) or SEP-IRA both lowers your taxable income and moves money you keep out of your spending (a different question that belongs in its own tool). Take-home here means after-all-tax spendable cash.
- Health premiums are not modeled. Do not put them in business expenses: under IRC §162(l) a self-employed health premium reduces your income tax but not your self-employment tax base, so treating it as a Schedule C expense would understate your SE tax. Build it into your take-home target instead.
- Expenses are a flat annual dollar figure. Costs that scale with revenue (subcontractors, payment fees, commissions) are not modeled as a percentage.
- State tax is a flat effective rate, not bracket math: effective rate = income tax collections per capita ÷ per-capita personal income, from the Tax Foundation, Facts & Figures 2026, Table 12 (FY2024); D.C. from Table 13 (FY2023) and the US BEA, SAINC1 per-capita personal income, 2024 annual. It is an average across taxpayers. Local and city income taxes are not included.
- The QBI high-earner phase-out is not computed. The §199A(a) overall limitation is applied, but the separate W-2/UBIA phase-out that begins around $201,750 of taxable income for single filers in 2026 is flagged with a caveat rather than guessed at. If that caveat appears, treat the rate as optimistic. The §199A(i) minimum-deduction rules are not modeled either: they only bind below roughly $2,000 of taxable income.
- No capital-gain input (net capital gain is treated as zero), no multi-state apportionment, and no value-or-project-based pricing beyond converting the hourly rate to a daily one.
Tax constants were last verified 2026-07-15 against their primary sources. Full methodology on themethodology page.These are estimates for planning, not tax advice.