The freelance vs full-time income comparison reveals the true cost of going independent. A freelancer earning $80/hour might net less than a full-time employee at $120K after accounting for self-employment tax, health insurance, unpaid vacation, and variable income. This calculator shows your real breakeven hourly rate.
Freelance / Contract
Full-Time / Employee
How to Compare Freelance vs Full-Time Income
The biggest mistake in freelance vs full-time comparison is comparing gross income without accounting for hidden costs. A $100K freelance income sounds better than an $85K salary — but after self-employment tax (~14%), health insurance ($6,000/year), unpaid vacation (2 weeks = $3,800), and business expenses ($3,600/year), the freelancer nets about the same as the employee.
Step 1: Calculate Freelance Gross Income
Multiply your hourly rate by billable hours per week by weeks worked. Note: billable hours are typically 75-85% of hours worked — account for admin, sales, non-billable meetings, and downtime between contracts.
Step 2: Subtract Freelance-Specific Costs
Key costs to subtract: self-employment tax (15.3%, ~14% net after deduction), health insurance premiums (employer pays for employees), retirement contributions out of pocket, business expenses, and the value of unpaid vacation days.
Step 3: Calculate True Full-Time Value
Add up all full-time benefits beyond salary: 401k employer match (3-6% = $3,600-7,200/yr at $120K), employer health insurance ($4,800-7,200/yr), PTO value (15 days at $80K = $4,615/yr). The true total compensation is often 20-30% above the base salary.
The Rule of Thumb
Your freelance rate needs to be 1.5-2x your equivalent full-time hourly rate to break even. If a full-time job pays $60/hr equivalent, aim for $90-120/hr in freelance work. Use this calculator to find your exact breakeven rate.
Frequently Asked Questions
What is the self-employment tax rate?
Self-employment tax is 15.3% on net self-employment income up to $168,600 (2025), and 2.9% above that. This covers Social Security (12.4%) and Medicare (2.9%). Employees split this with their employer (7.65% each). Freelancers pay both halves, though half is deductible. The net effective rate is approximately 14.1% after the deduction.
What is the freelance rate rule of thumb?
A common rule is that your freelance hourly rate should be 1.5-2x your equivalent full-time hourly rate to break even after factoring in self-employment tax, no paid vacation, no employer-paid benefits, and income variability. This calculator shows your exact breakeven rate.
How is PTO value calculated for full-time comparison?
PTO value is calculated as (annual salary / 52 / 5) × PTO days — your effective daily rate times the number of paid vacation days. This represents real compensation: as a freelancer, every vacation day is unpaid. A full-time job with 15 PTO days at $80K salary adds about $4,615 in value that freelancers must earn in addition to covering their base income.
Does this freelance comparison tool account for taxes?
Yes. The calculator applies the self-employment tax rate (15.3% SE tax, less the 50% deduction) and estimates federal income tax based on your income level. It also accounts for whether your health insurance premiums are deductible as a self-employed person.
Is this freelance vs full-time calculator free?
Yes, completely free with no signup required. All calculations run locally in your browser.