1099 vs W-2: what you actually take home in 2026
A 1099 contractor has to earn about 25 to 35 percent more than a W-2 employee to end up with the same money, because the contractor pays both halves of Social Security and Medicare, buys their own health insurance, and gets no paid time off. Put both offers in below and the calculator shows take home pay for each, using the 2026 federal brackets, and the 1099 rate that breaks even.
Compare the two offers
Federal tax only. Add your state rate in the box if you have one. Nothing you type is sent anywhere.
2026 federal brackets and standard deduction (IRS Rev. Proc. 2025-32), Social Security wage base $184,500 (SSA). Estimate only, not tax advice.
Why the 1099 rate has to be higher
Four things come out of a contractor's pay that never touch an employee's.
- The employer half of payroll tax. An employee pays 7.65 percent for Social Security and Medicare and the employer pays the other 7.65. A contractor pays both, 15.3 percent, on 92.35 percent of net profit. Half of it is deductible, which softens it, but it is still the biggest gap.
- Health insurance. An employer typically pays $6,000 to $15,000 a year toward it. A contractor buys their own. It is deductible, but it is still money out.
- Paid time off. A salary covers 52 weeks. A contractor bills the hours they work. Two weeks of vacation, a week sick and ten holidays is 200 hours nobody pays for.
- Unemployment and workers comp. The employer pays these for an employee. The contractor has neither.
What the contractor gets back: business expenses come off the top, the 20 percent qualified business income deduction takes a fifth of profit out of income tax for most sole proprietors, and a solo 401k lets them shelter far more than an employee can. For a high earner with low expenses and their own insurance already, 1099 can come out ahead. For most technicians, it does not unless the rate is 25 to 35 percent higher.
For the business owner: which one to hire
The choice is not yours to make on price alone. The IRS and most states decide who is an employee by who controls the work. A technician who works your schedule, drives your truck, uses your tools and does your jobs is an employee whatever the contract says. Misclassifying them means back payroll taxes, penalties, and in many states, a workers comp claim you have no cover for.
Real 1099 work in the trades: a specialist you bring in for a job you do not do yourself (a well driller, a calibration tech, a licensed electrician on a plumbing job), who sets their own hours, brings their own tools, invoices you, and works for other companies too.
Cost to you of a W-2 technician at $60,000: about $75,000 to $85,000 once payroll tax (7.65 percent), unemployment insurance, workers comp (5 to 15 percent in the trades), and benefits are added. That is the number to compare to a contractor's invoice, and it is why the contractor's rate looks high.
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Book a free 15 minute callNo pitch deck. We run your audit live on the call.How the calculator works
- W-2: salary minus Social Security (6.2 percent up to $184,500), Medicare (1.45 percent, plus 0.9 percent over $200,000 single or $250,000 joint), federal income tax on salary minus the standard deduction using the 2026 brackets, and your state rate. Benefits are added back as value received.
- 1099: rate times hours, minus expenses, gives net profit. Self employment tax is 15.3 percent of 92.35 percent of net (Social Security part capped at the wage base). Taxable income is net, minus half the SE tax, minus health insurance, minus the standard deduction, minus 20 percent QBI if ticked. Federal income tax on that, plus state. Take home is net minus health insurance, SE tax, federal and state tax.
- Break even: the hourly rate at which 1099 take home equals W-2 take home plus benefits, found by search.
- Not included: 401k contributions, itemized deductions, tax credits, local taxes, the QBI phase out above $201,775 single or $403,500 joint, S corp elections. Those can move the answer; a tax professional can run your exact numbers.
Common questions
How much more should a 1099 contractor make than a W-2 employee?
Usually 25 to 35 percent more, before benefits. The contractor pays both halves of Social Security and Medicare (15.3 percent instead of 7.65), buys their own health insurance, and gets no paid time off, no unemployment insurance and no workers comp. The calculator on this page gives the exact break even rate for your numbers.
Is $50 an hour 1099 the same as $50 an hour W-2?
No. At $50 an hour and 2,000 hours a year, single filer, federal tax only, the W-2 worker takes home about $79,000 and the 1099 contractor about $76,000 before buying any health insurance. Add $8,000 of employer paid benefits on the W-2 side and $7,000 of health insurance the contractor buys, and the 1099 rate needs to be about $62 an hour to break even.
What is self employment tax in 2026?
15.3 percent of 92.35 percent of net self employment income: 12.4 percent Social Security up to $184,500 of earnings, plus 2.9 percent Medicare on all of it. Half of it is deductible against income tax.
What is the 2026 standard deduction?
$16,100 for single filers, $32,200 for married filing jointly, $24,150 for head of household, per IRS Rev. Proc. 2025-32.
Does the 1099 contractor get the 20 percent QBI deduction?
Usually, yes. Most sole proprietors and single member LLCs can deduct 20 percent of qualified business income. Limits start to phase in above $201,775 (single) or $403,500 (joint) in 2026. The calculator applies it below those limits.
Can my employer just switch me to 1099?
Not legally, if the job is the same. The IRS and most states look at who controls the work, not what the contract says. A technician who works set hours with company tools on company jobs is an employee. Misclassification means back taxes and penalties for the business.