How do freelance taxes compare to W‑2?

Freelancers pay both sides of payroll tax (SE tax) but can deduct business expenses and often a portion of health insurance and home office. Net results depend on deductions and effective tax rate.

Contractor vs W‑2: which pays more?

Contractor roles often offer higher gross pay but require covering benefits, taxes, and unpaid time. The calculator compares net take‑home after expenses and taxes so you can evaluate offers apples‑to‑apples.

What billable utilization should I assume?

Typical freelancers bill 50–70% of working hours after accounting for admin, marketing, downtime, and vacation. Lower utilization implies a higher hourly rate to hit income targets.

Freelancer Financial Calculator

Calculate your required hourly rate and compare freelance vs W2 income

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Get personalized default values based on your location, age, and income. All data is stored locally on your device.

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Required Hourly Rate

$114

1440 billable hours/year

Gross Annual Income

$165k

0.4% effective tax rate

Net Annual Income

$80k

$6667/month

Quick Scenarios

Your Freelance Details

Desired Annual Net IncomeHow much you want to take home after taxes and expenses

Most solo freelancers target $40k-$200k net income.

$40,000$200,000

Billable Hours per WeekHours you can realistically bill to clients each week

Many freelancers bill 25-35 hours per week.

1050

Weeks Worked per Year4 weeks vacation/unpaid

Plan for vacations or downtime when setting weeks worked.

4052

Health Insurance CostAnnual cost for health insurance

Average ACA premiums for individuals range $4k-$8k annually.

$0/year$15,000/year

$/year

Retirement ContributionSEP IRA or Solo 401(k) contributions

For 2025, SEP/Solo 401(k) limit is $66,000.

$0/year$25,000/year

$/year

Business ExpensesSoftware, equipment, office, etc.

Track software, equipment, marketing, and travel costs.

$0/year$20,000/year

$/year

Federal Tax RateYour federal income tax bracket

Select your marginal federal tax bracket.

10.00%37.00%

State Tax RateYour state income tax rate (0% for no-tax states)

Set to 0% if you are in a no-tax state.

0.00%13.00%

Tax Breakdown

Federal Tax$36,222

State Tax$8,232

Self-Employment Tax (15.3%)$25,191

Total Taxes$69,645

Compare to W2 Job

W2 SalaryComparable W2 job salary for comparison

Use a comparable role/seniority for accurate comparison.

$40,000$200,000

W2 Benefits ValueHealth, 401k match, PTO, etc.

Include health, retirement match, PTO, and other perks.

$0$50,000

W2 Job

Gross Income$100,000

Total Taxes-$29,453

(0.3% effective rate)

Net Income$55,548

Freelance

Gross Income$164,645

Total Taxes-$69,645

(0.4% effective rate)

Net Income$80,000

Net Income Difference

+$24,453

Break-even hourly rate: $85/hr

Charge this rate to match your W2 net income

Frequently Asked Questions

Common questions about the Freelancer Financial Calculator

Start from your target annual income, add expenses (tools, insurance), add self‑employment taxes (~15.3% on net), then divide by billable hours (often 1,000–1,400/yr). Many underestimate non‑billable time.

📚 Tax Rate Sources

Federal Income Tax Brackets (2025):

Ordinary income is taxed at graduated rates from 10% to 37% based on filing status and income level.
→ Source: IRS - Federal Income Tax Rates and Brackets

Capital Gains Tax Rates (2025):

• Short-term capital gains (assets held ≤1 year): Taxed at ordinary income rates (10-37%)
• Long-term capital gains (assets held >1 year): 0%, 15%, or 20% based on income
→ Source: IRS Topic 409 - Capital Gains and Losses

State Tax Rates:

State income tax rates vary from 0% (no state income tax) to 13.3% (California top rate).
→ Source: Tax Foundation - State Income Tax Rates

Qualified Dividends:

Qualified dividends are taxed at the same preferential rates as long-term capital gains (0%, 15%, or 20%).
→ Source: IRS Topic 404 - Dividends

Note: Tax laws change frequently. These rates are current as of 2025. Always consult a tax professional for personalized advice.

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⚠️ Important Disclaimer

This Freelancer Financial Calculator provides estimates for educational and informational purposes only. Actual results may vary significantly based on individual circumstances, market conditions, regulatory changes, and other factors beyond the scope of this calculator.

The calculations and projections provided are based on assumptions and historical data that may not reflect future performance.Past performance does not guarantee future results.

This tool is not financial advice, tax advice, legal advice, or investment advice. For personalized guidance tailored to your specific situation, please consult with qualified professionals including:

Certified Financial Planner (CFP)
Certified Public Accountant (CPA) for tax matters
Licensed attorney for legal matters
Registered Investment Advisor (RIA) for investment decisions

Data Accuracy: All data sources, statistics, and rates were verified as accurate as of October 2025. Tax rates, market conditions, and other financial data change over time. Always verify current rates and consult official sources.

No Warranties: While we strive for accuracy, we make no warranties or guarantees regarding the accuracy, completeness, or reliability of any information provided. Use this tool at your own risk.