Why a 1099 rate has to be higher
An employee's Social Security and Medicare tax is split with the employer: 6.2% Social Security (up to the yearly wage base) and 1.45% Medicare come out of each paycheck, and the employer pays the same amount again. A contractor pays both halves as self-employment tax, 15.3% of 92.35% of profit. Half of it is deductible, and so is the 20% qualified business income deduction, which softens the hit, but on most incomes the contractor still pays more federal tax on the same pay.
The bigger gaps are usually outside tax:
- Unpaid time off. A salary pays for holidays, vacation, and sick days. As a contractor, weeks you don't bill earn nothing. Ten holidays plus two weeks off is about four weeks a year.
- Benefits. Health insurance is often the largest. Employer premium contributions commonly run several thousand dollars a year for single coverage and much more for family coverage; ask the employer for the actual figure.
- Expenses and downtime. Your own laptop, software, and insurance, plus time spent finding work, invoicing, and gaps between contracts.
An example
A single person in 2026 is offered an $80,000 salary or $50 an hour as a contractor. Billing 40 hours a week for 48 weeks, the contract pays $96,000 a year, and they'd spend $3,000 on business expenses.
- W-2: $6,120 of Social Security and Medicare (7.65%) and $8,770 of income tax leave $65,110.
- 1099: profit is $93,000. Self-employment tax is $13,140, and income tax is $7,090 after the half-SE-tax and QBI deductions, leaving $72,769, or $7,659 more.
The break-even rate is $44.42 an hour. If the job also came with $7,000 a year of employer health coverage and 401(k) match, the gap shrinks to $659 and the break-even rate rises to $49.51, so $50 an hour is barely ahead.
Contract pay needed to match a salary (2026)
The yearly 1099 pay that leaves you with the same federal after-tax income as each salary, with no business expenses and no benefits counted. Divide by the hours you expect to bill to get an hourly rate.
| W-2 salary | Single | Married filing jointly (no other income) |
|---|---|---|
| $40,000 | $42,270 | $42,817 |
| $60,000 | $63,154 | $63,739 |
| $80,000 | $82,284 | $84,541 |
| $100,000 | $102,222 | $105,425 |
| $150,000 | $152,012 | $155,425 |
| $200,000 | $203,008 | $205,037 |
Tax only. Add your expected expenses and the value of any benefits you'd lose, then divide by billable hours, not 2,080. Use the calculator above for your own numbers.
What this calculator doesn't cover
- State and local taxes. They apply to both offers, and a few cities and states tax self-employment income separately.
- Retirement plans. A SEP-IRA or solo 401(k) can lower a contractor's income tax, and a 401(k) lowers an employee's. Neither is modeled here.
- The self-employed health insurance deduction, which lets many contractors deduct premiums they pay themselves.
- QBI limits for high earners. The 20% QBI deduction is figured for a sole proprietor with no employees, as on our estimated tax calculator. If your taxable income is above about $201,750 (single, 2026) and your work is a specified service like consulting, law, or health, the deduction phases out faster than shown.
- Credits and other income, such as the child tax credit, investment income, or a second job.
- Worker classification. Whether you're an employee or a contractor depends on how the work is controlled, not on what the paperwork says. See the IRS guidance below.
FAQ
How much more should a 1099 contractor charge than a W-2 employee?
For federal tax alone, only about 1 to 7% more pay (see the table), because the half-SE-tax and 20% QBI deductions offset much of the extra Social Security and Medicare tax. Once you add unpaid time off, benefits, and expenses, contractors often need 20 to 40% more than the salary's hourly equivalent, but it depends on your numbers. Put them in the calculator.
Is a $50/hour 1099 job the same as $50/hour W-2?
No. At the same hourly rate the contractor pays the employer's 7.65% share of Social Security and Medicare on top of their own (less the deductions above), isn't paid for time off, and gets no benefits.
Does the calculator include the 0.9% Additional Medicare Tax?
Yes. It applies to wages and self-employment earnings over $200,000 (single and head of household), $250,000 (married filing jointly), or $125,000 (married filing separately), and it's counted in the Social Security and Medicare line.
Does this calculator store my data?
No. Everything is calculated in your browser, and nothing you type is sent anywhere.
Sources
- Employee and employer Social Security (6.2% each) and Medicare (1.45% each) rates, and the 2026 wage base ($184,500): IRS Topic No. 751.
- Self-employment tax, the half-SE-tax deduction, and the QBI deduction: IRS Form 1040-ES (2026) and Schedule SE.
- 2026 brackets and standard deduction: Rev. Proc. 2025-32. 2027: Rev. Proc. 2026-35. 2027 wage base ($192,300): SSA 2027 COLA fact sheet.
- Additional Medicare Tax thresholds: IRS Form 8959.
- Who counts as a contractor: IRS: Independent contractor (self-employed) or employee?
Last checked November 6, 2026. For education and planning only, not tax advice.
Related calculators
See just the Social Security and Medicare part with the self-employment tax calculator. Driving your own car for contract work? The mileage deduction calculator shows what your business miles are worth at the 2026 rates, and the home office deduction calculator compares the simplified and regular methods if you work from a room at home. Income varies month to month as a contractor; the 50/30/20 budget calculator and savings goal calculator help you plan a buffer.