How do I determine hourly rate if moving from W2 to 1099 status

[vze56v6x]

I need advice

I currently make $165000 as W2 employee in NJ.

At the end of the month I am being laid off and I am being offered 1099 positions.

However the rates are low like $80/hr

Does anyone have suggestions on the best way to determine the hourly rate I should be asking to ensure I my take home after setting aside taxes is close to my W2 pay?  I am not sure how to quickly determine that hourly rate. Suggestions??

[xmasbaby0]

Some thoughts --

You have not mentioned here whether you have been a salaried or hourly employee to earn the amount you mention.

You have not mentioned the kind of work you have been doing.   If you work as an independent contractor, you will be preparing a Schedule C for business expenses.  Do you expect to use your vehicle for the work?   Will you have a home office?   Other kinds of business expenses?

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

https://blog.turbotax.intuit.com/self-employed/self-employed-tax-deductions-

calculator-2021-2022-50907/

https://ttlc.intuit.com/questions/1901110-do-i-need-to-make-estimated-tax-payments-to-the-irs

[vze56v6x]

In current role I am a salaried employee with full benefits in IT.

As a 1099 I will be doing same role but either remote or commuting.

The reason i ask about the hourly rate is while I can easily determine the hourly rate as a salaried employee, that also includes tax deductions, 401k contributions, health insurance deductions etc. I know I cannot work at the same hourly rate as a 1099 considering I have to pay taxes myself.

To be on the safe side I factored 30% of whatever I earn as a 1099 will be for taxes. I am just not sure if this makes sense. I understand and realize I will prepare a Sch C and will be able to include expense deductions, I just want to make sure my hourly rate covers taxes and allows a safety net to still walk away with what I was netting as a W2.

My guess is I need to be in the range of $120-$130 an hour to be comfortable. i have been offered rates at $80/hr which i feel is too low considering 30% for taxes.

[Mike9241]

Illogical. from your salary there's a deduction for Social Security, Medicare and Income taxes.

if you work 2000 hours a year, you're paid around $82.50 per hour. Then there are the deductions for income taxes and other payroll taxes so your take home may only be around 70% or even less of your gross pay. With a 1099 there are no such tax deductions. 

other factors to consider is the number of hours you'll be working as an IC

with a W-2 your employer pays 1/2 the social security and medicare taxes (FICA). as a schedule C you pay 100%. but only on 92.35%. then you also get a deduction for the extra 1/2 you pay. it gets more complicated. You pay out of pocket for commuting to and from work for which you get no tax deduction. working from home you save the cost. as an employee there is no home office deduction but as self-employed if you set aside a specific area of your home used exclusively for your business, you can take a deduction for the use. 

another option might be an S-Corporation where only a reasonable portion of the profit must be taken out as a salary and would be subject to FICA and income taxes. the rest is subject only to income taxes. 

So what's a comparable rate is a matter of opinion. 

[xmasbaby0]

And---to state the obvious---you can request any hourly rate you want to ---but whether clients are willing to pay that hourly rate is another issue.

[taxlady28]

A quick estimate of hourly rate is 1/2 of yearly total divided by 1000.  Your hourly rate is $82.50.