What is the self-employment tax and how does it affect my take-home?

Self-employed people pay both the employee share (7.65%) and employer share (7.65%) of Social Security and Medicare taxes, totaling 15.3% on net self-employment income. For a $100,000 gross freelance income, SE tax is approximately $14,130. This is on top of regular income tax. You can deduct half of the SE tax on your federal income tax return, which partially offsets it.

How do I compare a freelance offer to a salaried offer fairly?

Add the full value of employer-paid benefits to the salaried offer (health insurance, dental, 401k match, PTO value). Subtract SE tax from the freelance gross. A $95,000 salary with $10,000 in benefits and 15 PTO days is worth approximately $107,000 in comparable value. That is more than $100,000 gross freelance income after SE tax ($85,870).

What hourly rate do I need to match a salaried offer?

Take the salaried true value (salary + benefits + PTO value), add SE tax back, and divide by your working hours. To match a $107,000 salaried package: divide by (1 - 0.153 effective SE rate) = $107,000 / 0.847 = $126,300 gross needed. Divide by 2,000 hours = $63.15/hour minimum.

Should I use 50 or 52 weeks in the calculation?

Use 52 weeks if you work every week of the year with no time off. Use 50 weeks if you take approximately 2 weeks unpaid. Most freelancers use 48-50 weeks to account for gaps between projects, holidays, and unpaid sick days. Salaried employees with paid PTO effectively work 52 paid weeks even if they take time off.

What benefits value should I use for the salaried comparison?

A commonly cited range for employer-sponsored benefits value is $8,000-$15,000 per year for full-time employees, covering health insurance, dental, vision, 401k match, and paid leave. The Kaiser Family Foundation 2024 survey reports average employer contribution to employee-only health coverage at approximately $7,800 per year. Use your actual benefits or this range as a default.

Does the calculator account for income tax?

The calculator shows gross income, SE tax, and adjusted pre-income-tax income. It does not compute your full income tax because that depends on your filing status, deductions, and other income. Use the Take-Home Pay Calculator to model your full federal and state income tax after knowing your gross income.

Hourly to Annual Salary Converter

Convert hourly rate to annual pay, reverse the math, or compare freelance and salaried offers with benefits and PTO baked in.

100% client-side. Inputs stay in your browser (ons-hourly-annual-inputs).

Tax and benefit values are planning estimates. Your bracket, state, and employer plan change the true comparison.

Currency

Hourly rateHours per weekWeeks worked per yearSelf-employed (apply SE tax)

Converted value

$100,000

Gross annual salary

Effective hourly: $50/hr

Breakdown

Gross annual	$100,000
Self-employment tax	—
Benefits value	—
PTO value	—
True comparable value	$100,000

How this tool works

The base conversion is straightforward: Annual Gross = Hourly Rate × Weekly Hours × Weeks Worked Per Year. But comparing a freelance offer to a salaried position requires adjusting for three structural differences. Self-employment tax: freelancers pay both the employer and employee halves of Social Security (12.4%, capped at the SS wage base) and Medicare (2.9%, no cap), totalling 15.3% of net self-employment income. Salaried employees pay only the employee half (7.65%), with the employer covering the rest. Deduction: 50% of the SE tax is deductible from federal taxable income, reducing effective SE tax by roughly half the marginal income tax rate. Benefits gap: health insurance, 401(k) employer match, and PTO all have real dollar value that a freelancer must fund independently. The tool sums the dollar value of these benefits on the salaried side, then shows the freelance gross needed to net the same after SE tax. Key assumption: both arrangements are taxed at the same effective federal and state income tax rate. Edge case: freelancers can deduct legitimate business expenses (home office, equipment, software, professional development) from gross income before SE tax is applied; a freelancer with significant deductible expenses needs a lower gross rate to match a salaried offer than the simple calculator shows.

Worked example

Simple conversion: $50/hour, 40 hours/week, 50 weeks/year. Gross annual = $100,000. Self-employed: Self-employment tax = $14,130. Net before income tax = $85,870. Freelance vs salaried: Freelance $50/hour ($85,870 adjusted). Salaried alternative: $95,000 base + $8,000 benefits + $5,700 PTO = $108,700 total minus $1,800 benefits paid = $106,900. Salaried is worth $21,030 more per year. To match: freelancer needs approximately $63/hour.

If you are setting a freelance rate from scratch rather than converting an existing one, see How to Set Your Freelance Hourly Rate.

Frequently asked questions

What is the self-employment tax and how does it affect my take-home?
Self-employed people pay both the employee share (7.65%) and employer share (7.65%) of Social Security and Medicare taxes, totaling 15.3% on net self-employment income. For a $100,000 gross freelance income, SE tax is approximately $14,130. This is on top of regular income tax. You can deduct half of the SE tax on your federal income tax return, which partially offsets it.
How do I compare a freelance offer to a salaried offer fairly?
Add the full value of employer-paid benefits to the salaried offer (health insurance, dental, 401k match, PTO value). Subtract SE tax from the freelance gross. A $95,000 salary with $10,000 in benefits and 15 PTO days is worth approximately $107,000 in comparable value. That is more than $100,000 gross freelance income after SE tax ($85,870).
What hourly rate do I need to match a salaried offer?
Take the salaried true value (salary + benefits + PTO value), add SE tax back, and divide by your working hours. To match a $107,000 salaried package: divide by (1 - 0.153 effective SE rate) = $107,000 / 0.847 = $126,300 gross needed. Divide by 2,000 hours = $63.15/hour minimum.
Should I use 50 or 52 weeks in the calculation?
Use 52 weeks if you work every week of the year with no time off. Use 50 weeks if you take approximately 2 weeks unpaid. Most freelancers use 48-50 weeks to account for gaps between projects, holidays, and unpaid sick days. Salaried employees with paid PTO effectively work 52 paid weeks even if they take time off.
What benefits value should I use for the salaried comparison?
A commonly cited range for employer-sponsored benefits value is $8,000-$15,000 per year for full-time employees, covering health insurance, dental, vision, 401k match, and paid leave. The Kaiser Family Foundation 2024 survey reports average employer contribution to employee-only health coverage at approximately $7,800 per year. Use your actual benefits or this range as a default.
Does the calculator account for income tax?
The calculator shows gross income, SE tax, and adjusted pre-income-tax income. It does not compute your full income tax because that depends on your filing status, deductions, and other income. Use the Take-Home Pay Calculator to model your full federal and state income tax after knowing your gross income.