1099 vs W-2 Calculator (2026)
A $60 an hour contract sounds like more than an $80,000 job, but as a 1099 contractor you pay both halves of Social Security and Medicare, buy your own health insurance and get no paid time off or 401(k) match. Compare both options and find the rate you need to break even.
Contractors get no paid vacation or holidays, so 46 to 48 weeks is common.
Federal taxes only. State income tax usually affects both options about the same.
Break-even rates (single, 40 hours a week, 48 weeks)
| W-2 salary (4% match, $150/mo health) | Contract rate needed to match it |
|---|---|
| $60,000 | $38.81 per hour |
| $80,000 | $49.79 per hour |
| $100,000 | $61.06 per hour |
That is about 30% more per hour than the salary divided by 2,080 work hours. The real answer depends on your health insurance, expenses and how many weeks you can bill.
Why contractors need a higher rate
- Self-employment tax. Employees pay 7.65% for Social Security and Medicare and the employer pays the other 7.65%. Contractors pay the full 15.3% on 92.35% of their profit, though half of it is deductible.
- No benefits. No employer health plan, 401(k) match, paid vacation, sick days or holidays.
- Unpaid time. Finding clients, invoicing and gaps between contracts are not billable.
- Some tax breaks. Contractors can deduct business expenses and health insurance, and many get the 20% qualified business income (QBI) deduction.
How this calculator works
W-2: salary minus your pre-tax 401(k) and health premiums gives taxable wages; federal income tax uses the 2026 brackets and standard deduction, and Social Security (6.2% up to $184,500) and Medicare (1.45%) are taken from wages. The employer match is added as value. 1099: rate times hours times weeks, minus expenses, gives profit. Self-employment tax is 15.3% on 92.35% of profit (Social Security part capped at $184,500). Half of it and your health insurance are deducted, then the 20% QBI deduction, and federal tax is figured with 2026 brackets. The break-even rate is the hourly rate where both totals match.
FAQ
How much more should a 1099 contractor charge?
Often 25% to 50% more per hour than the salary works out to, to cover self-employment tax, insurance, unpaid time off and no benefits.
What is self-employment tax in 2026?
15.3% on 92.35% of your net self-employment income: 12.4% Social Security up to $184,500 and 2.9% Medicare on all of it, plus 0.9% extra Medicare above $200,000 single.
Can contractors deduct health insurance?
Yes. Self-employed people can usually deduct health insurance premiums for themselves and their family, if not eligible for an employer plan.
What is the QBI deduction?
A deduction of up to 20% of qualified business income for many self-employed people. It was made permanent by the 2025 tax law.
Do contractors pay quarterly taxes?
Usually yes. Without withholding, you generally pay estimated taxes four times a year to avoid penalties.
Rules and rates last checked: October 2026. This is an estimate for general information only, not financial, tax or legal advice. Check IRS.gov or a tax professional before you file.