Contractor Income Calculator
An hourly rate is not a salary. Multiply $75 by 40 hours and 52 weeks and you get $156,000, but contractors rarely bill every hour of the year, and the tax bill lands differently when you are the employer too. This calculator converts an hourly rate into real take-home income using the billable weeks you actually work, and it also runs the question backwards: tell it the annual income you want to keep, and it tells you the hourly rate you must charge.
Use the forward mode to see what a rate is worth, or the reverse mode to price your services from an income goal. If you are still setting the rate itself, with overhead and profit built in, start with the contract rate calculator and then bring the finished rate here to see what it pays after tax.
Planning estimates only. The single tax rate is a simplification: real taxes are progressive, and US contractors also owe self-employment tax and any state tax. Not tax advice.
Quick Answer
Key takeaways
- Billable weeks are the whole game. The same $75 rate is worth $156,000 at 52 weeks and $135,000 at 45 weeks, before tax.
- The reverse mode grosses your target up for tax first, then divides by billable hours. Skipping the gross-up is the most common underpricing error new contractors make.
- The monthly figure is a run rate (weekly pay x 4.33), so it will not match the annual figure divided by 12 unless you bill all 52 weeks.
- One flat tax rate is a planning simplification. US contractors owe 15.3% self-employment tax on top of income tax, so fold both into the rate you enter.
- Quick Answer
- How to use the contractor income calculator
- The formulas in both directions
- Worked example: $75 an hour, both directions
- The 1,800-hour reality check
- Contract income versus a salary: the 1.3 to 1.5x rule
- What competing calculators miss
- Frequently Asked Questions
- Add This Calculator to Your Website
- References
How to use the contractor income calculator
Start in the forward mode if someone has quoted you a rate, or a client is pressing you for one, and you want to know what it pays. Enter the rate, your billable hours per day and days per week, the weeks you will genuinely bill, and one combined tax rate. The result shows the annual net first, then the daily, weekly, and monthly figures and the tax amount, so you can see the whole shape of the income at once.
Use the reverse mode when the income goal comes first, which is the better way to price. Set the take-home you need, your tax rate, and your realistic billable hours, and the tool works out the billings required and the hourly rate that produces them. If the required rate looks unquotable in your market, the honest fixes are more billable hours, a lower tax drag through legitimate deductions, or a lower target, not wishful arithmetic. Freelancers paid per project rather than per hour can cross-check a rate against earnings patterns with the commission to hourly calculator when part of the pay is variable.
The formulas in both directions
Both modes are the same arithmetic read in opposite directions, which is why their answers reconcile exactly.
One subtlety lives in the monthly figure. It multiplies the weekly amount by 4.33, the average number of weeks in a month across a full 52-week year, so it describes your earning pace during a working month. The annual figure instead uses the billable weeks you entered. At 50 billable weeks the two views deliberately differ: $12,990 a month at full pace versus $150,000 across your real year. Neither is wrong; they answer different questions, and the FAQ below works the numbers.
Worked example: $75 an hour, both directions
The calculator is pre-filled with this case, and every figure below is what it returns.
| Measure | Calculation | Result |
|---|---|---|
| Daily income | $75 x 8 hours | $600.00 |
| Weekly income | $600 x 5 days | $3,000.00 |
| Monthly run rate | $3,000 x 4.33 | $12,990.00 |
| Annual gross | $3,000 x 50 weeks | $150,000.00 |
| Tax at 25% | $150,000 x 25% | $37,500.00 |
| Annual net income | $150,000 minus $37,500 | $112,500.00 |
| Reverse: gross needed for $100,000 net at 30% tax | $100,000 / 0.70 | $142,857.14 |
| Reverse: required hourly rate | $142,857.14 / 2,000 hours | $71.43/hr |
The 1,800-hour reality check
The classic mistake is multiplying by 2,080 hours (40 x 52). Contractors do not bill 52 weeks: subtract holidays, vacation, sick days, gaps between contracts, and the unbilled hours spent quoting, invoicing, and chasing payment. Around 1,800 billable hours a year is a realistic starting point for full-time contracting. Watch what that assumption alone does to a $75 rate at a 25% tax rate:
Nothing about the rate changed; only the honesty of the calendar did, and gross income moved by $21,000. Enter your real billable weeks in the calculator rather than 52. If you do not know them, last year’s invoices know: count the weeks in which you actually billed a client. For a plain salary conversion with no contractor tax layer, the annual income to hourly calculator handles the employee side of the comparison.
Contract income versus a salary: the 1.3 to 1.5x rule
A contract rate should run about 1.3 to 1.5 times the hourly equivalent of a salary to break even, because contractors pay both halves of payroll tax (15.3% self-employment tax in the US, against the 7.65% an employee sees deducted) and fund their own health insurance, retirement, and time off. The IRS guide to self-employment tax sets out how that 15.3% is made up: 12.4% for Social Security and 2.9% for Medicare.
What the contract rate must cover
- Both halves of payroll tax, not just the employee half
- Health insurance premiums an employer used to pay
- Retirement contributions with no employer match
- Unpaid vacation, holidays, sick days, and gaps between contracts
- Tools, insurance, accounting, and other business costs
What a salary quietly includes
- Employer-paid 7.65% payroll tax on top of the stated salary
- Paid time off that never reduces a paycheck
- Employer health insurance and retirement contributions
- Unemployment insurance and workers compensation coverage
- Equipment, software, and training provided
Put numbers on it: a $100,000 salary is roughly $48 an hour, so a fair contract rate for the same work starts near $65 to $70 an hour. A $45-an-hour contract looks like $93,600 a year at 40 x 52, but with unpaid weeks it bills closer to $85,000, and after the extra payroll tax and self-funded benefits it matches a salary of only about $70,000. The multiplier is not greed; it is the cost of the benefits package showing up in a different line.
What competing calculators miss
The ranking tools split into two camps that never meet, and both camps make the same optimistic assumption about your calendar.
Miss 1: forward only, or reverse only. One set of tools turns a rate into income; another set turns an income goal into a rate. Pricing well needs both: the reverse mode to set your floor and the forward mode to test any offer against it. This calculator keeps both in one place with matching assumptions, so the two answers reconcile to the cent.
Miss 2: the automatic 2,080 hours. Several converters hard-code 40 hours times 52 weeks and never ask how many weeks you bill. The output flatters every rate by 10 to 15%. Here billable weeks are an input in both modes, defaulted to 50, and the article shows the cost of the assumption in dollars.
Miss 3: tax as an afterthought. Forward-only converters often show gross and stop, leaving the contractor to discover self-employment tax at filing time. Both modes here apply your tax rate as a first-class step, and the reverse mode grosses the target up before dividing, which is the step that keeps a $100,000 goal from quietly becoming an $85,000 outcome. The IRS guidance on estimated taxes explains why contractors pay that tax quarterly rather than through withholding.
One honest limit: a single flat tax rate cannot reproduce a progressive tax system, deductions, or credits. Treat the result as a planning figure, set the rate to your effective (average) rate rather than your top bracket, and have a tax professional model the real return before you rely on the number for a major decision.
Frequently Asked Questions
Multiply hourly rate x hours per day x days per week x billable weeks per year. $75 x 8 x 5 x 50 = $150,000 gross; after 25% tax, $112,500 net.
At 30% tax and 2,000 billable hours a year, you need about $71.43/hour. Use the reverse tab with your own numbers.
1,800 is a realistic full-time starting point after holidays, vacation, sick days, gaps, and unbilled admin. 2,080 assumes you bill every hour of a 52-week year, which almost nobody does.
Often roughly equal. At 1,800 billable hours $75/hour is $135,000 gross, but after both halves of payroll tax and self-funded benefits, the gap mostly disappears.
Most US contractors pay 25 to 32% of gross in combined federal, self-employment, and state tax. The tool uses one flat rate as a planning simplification.
Not separately: US contractors owe 15.3% self-employment tax on top of income tax. Fold it into the tax-rate field.
Because the monthly figure is a run rate: weekly pay multiplied by 4.33, the average weeks in a month across a full 52-week year. In the worked example that is $3,000 x 4.33 = $12,990, which annualizes to $155,880. The annual figure instead uses your billable weeks (50), giving $150,000. The monthly number describes a full working month; the annual number describes your real year.
Add This Calculator to Your Website
References
- Internal Revenue Service, “Self-Employment Tax (Social Security and Medicare Taxes)” – how the 15.3% rate is composed and applied, the tax every US contractor folds into this calculator’s tax field. IRS: Self-Employment Tax. Accessed October 2026.
- Internal Revenue Service, “Estimated Taxes” – why contractors pay tax in quarterly installments instead of through payroll withholding. IRS: Estimated Taxes. Accessed October 2026.
- Internal Revenue Service, “Gig Economy Tax Center” – federal tax guidance for independent contractors and platform workers. IRS: Gig Economy Tax Center. Accessed October 2026.
- Internal Revenue Service, “Independent Contractor (Self-Employed) or Employee?” – the classification rules behind who counts as a contractor in the first place. IRS: Independent Contractor or Employee. Accessed October 2026.
- US Social Security Administration, “Contribution and Benefit Base” – the annual wage cap that limits the Social Security portion of self-employment tax at higher incomes. SSA: Contribution and Benefit Base. Accessed October 2026.