If you are weighing a salaried job against contract work, or deciding what to charge a client, there are two questions. How much more tax does a 1099 contractor pay on the same money? And how much more does a contractor have to earn to end up with the same take-home? This page answers both with exact 2026 figures, then adds the part tax tables leave out: the benefits a job pays for.
Short answer (single filer, 2026, no state income tax): paid the same $75,000, a 1099 contractor owes $3,693 more tax than an employee. To take home what a $75,000 salary leaves you ($61,593), you need $80,646 of 1099 net profit, 7.5% more. That percentage is the same at every salary from $40,000 to $175,000. If you also have to replace $10,000 a year of employer benefits, it rises to 27.9%.
Employees and the self-employed pay into the same two programs at the same combined rate, 15.3%: 12.4% for Social Security and 2.9% for Medicare. What differs is who hands it over.
You pay 7.65%, withheld from each paycheck. Your employer pays the other 7.65% on top of your salary. It never appears on your pay stub, but it is part of what the job costs the employer.
You pay both halves as self-employment tax: 15.3% on 92.35% of your net profit. The 92.35% stands in for the fact that an employee's wages do not include the employer's half.
The income tax rules are the same for both. The contractor gets one adjustment the employee does not: half of the self-employment tax comes off adjusted gross income, which lowers income tax a little.
Single filer, standard deduction, a state with no income tax, 2026. The contractor's $75,000 is net profit, after business expenses.
| $75,000 of pay | W-2 employee | 1099 contractor |
|---|---|---|
| Social Security and Medicare | $5,738 | $10,597 |
| Half of self-employment tax deducted | n/a | −$5,299 from income |
| Federal income tax | $7,670 | $6,504 |
| Total tax | $13,408 | $17,101 |
| Take-home | $61,593 | $57,899 |
| Difference | $3,693 more tax as a contractor | |
The contractor pays $10,597 of self-employment tax against the employee's $5,738, then gets part of it back. Because $5,299 comes off income, federal income tax is $6,504 instead of $7,670. The gap grows with income until the Social Security wage base:
| Same pay | W-2 total tax | 1099 total tax | Extra as a contractor |
|---|---|---|---|
| $50,000 | $7,645 | $10,461 | $2,816 |
| $75,000 | $13,408 | $17,101 | $3,693 |
| $100,000 | $20,820 | $25,745 | $4,925 |
| $150,000 | $36,209 | $43,385 | $7,176 |
Single filer, 2026, no state income tax, no qualified business income deduction. In a state with an income tax the gap is usually a little smaller, because most states start from federal adjusted gross income and so also let the contractor subtract half of self-employment tax.
Comparing tax on the same pay answers the wrong question for most people. If a client offers a contract and an employer offers a salary, what you want to know is the contract profit that leaves you with the same money. That is the 1099 net profit below, found by searching for the profit whose take-home equals the salary's.
| W-2 salary | Take-home on the salary | 1099 net profit for the same take-home | How much more |
|---|---|---|---|
| $40,000 | $34,320 | $43,015 | 7.5% |
| $50,000 | $42,355 | $53,769 | 7.5% |
| $60,000 | $50,390 | $64,522 | 7.5% |
| $75,000 | $61,593 | $80,646 | 7.5% |
| $100,000 | $79,180 | $107,528 | 7.5% |
| $125,000 | $96,704 | $134,408 | 7.5% |
| $150,000 | $113,791 | $161,289 | 7.5% |
| $175,000 | $130,879 | $188,171 | 7.5% |
| $200,000 | $148,927 | $214,268 | 7.1% |
| $250,000 | $183,182 | $264,698 | 5.9% |
Single filer, 2026, no state income tax. Married couples filing jointly get the same 7.5% through $150,000.
Leave income tax aside for a moment. A salary keeps 92.35% of itself after the employee's 7.65%. A contract profit keeps 85.87% of itself after self-employment tax, because 15.3% of 92.35% is 14.13%. To keep the same amount, the profit has to be 92.35 ÷ 85.87 = 1.075 times the salary.
Income tax barely moves that answer. The profit that matches the salary, minus half of its self-employment tax, comes out almost exactly equal to the salary, so both people report nearly the same adjusted gross income and owe nearly the same income tax. That is why the percentage does not change with your tax bracket.
It only falls at the top of the table. Social Security tax stops at the 2026 wage base of $184,500. A contractor reaches it at $199,783 of profit (92.35% of that is $184,500), and above that point the 12.4% part of self-employment tax disappears. The contractor's disadvantage shrinks with it. For physician-level pay, see Locum vs W-2.
A salary is not the whole offer. Most full-time jobs come with an employer contribution to health insurance and often a retirement match. As a contractor you buy those yourself, out of what is left after tax. Here is the 1099 net profit that matches a $75,000 salary once you also have to replace a given amount of benefits each year:
| Benefits to replace each year | 1099 net profit needed | More than the $75,000 salary |
|---|---|---|
| None (tax only) | $80,646 | 7.5% |
| $5,000 | $88,289 | 17.7% |
| $10,000 | $95,931 | 27.9% |
| $15,000 | $103,573 | 38.1% |
That lines up with the familiar advice to charge 1.25 to 1.4 times a salary, but notice how little of it is tax: 7.5 points. The rest is benefits, and how much depends entirely on what your employer actually pays.
To find your own number, look at two places. Box 12 of your W-2, code DD, shows the total cost of your employer-sponsored health coverage; subtract what came out of your paychecks for it, and the rest is the employer's share. Your retirement plan statement shows the employer match. Add the two.
The table treats benefits as spending out of take-home pay. Self-employed health insurance premiums are deductible for income tax, so the true figure for health cover is somewhat lower. Unemployment insurance and workers' compensation have no line here, but you lose those too.
A salaried employee is paid for about 2,080 hours a year, holidays and vacation included. A contractor is paid only for hours billed to a client. After time off, finding work, invoicing and the gaps between projects, 1,600 billable hours is a realistic full-time year, and many freelancers bill fewer.
| W-2 salary | Salary per paid hour (2,080) | Contract rate, tax only (1,600 h) | Contract rate with $10,000 of benefits (1,600 h) |
|---|---|---|---|
| $50,000 | $24.04 | $33.61 | $41.97 |
| $75,000 | $36.06 | $50.40 | $59.96 |
| $100,000 | $48.08 | $67.21 | $76.76 |
| $150,000 | $72.12 | $100.81 | $110.64 |
So a $75,000 job with $10,000 of benefits is worth about $59.96 an hour of contract work, not the $36.06 an hour the salary works out to. A common pricing mistake is dividing the salary by 2,080 and adding a little for tax. The hours, not the tax, are the bigger correction: 2,080 paid hours against 1,600 billed is a 30% difference on its own.
Most sole proprietors can deduct 20% of their business profit, after subtracting half of self-employment tax, as long as the deduction is no more than 20% of taxable income. Our calculator leaves it out on purpose so its estimate errs high, but a contractor with taxable income under the 2026 threshold of $201,750 (single) usually gets it, and it narrows the gap a lot:
| Same pay | Extra tax as a contractor | QBI deduction saves | Extra after the deduction |
|---|---|---|---|
| $50,000 | $2,816 | $729 | $2,087 |
| $75,000 | $3,693 | $1,607 | $2,086 |
| $100,000 | $4,925 | $3,381 | $1,544 |
| $150,000 | $7,176 | $5,777 | $1,399 |
The deduction cuts federal income tax only. It does nothing to self-employment tax, which is why some gap always remains. Above the threshold, limits apply, and some professions (doctors, lawyers, consultants and others in "specified service" fields) lose it entirely at higher incomes.
A Solo 401(k) lets a contractor contribute as both employee and employer: up to $24,500 of employee deferrals in 2026, plus an employer contribution of up to 20% of net self-employment earnings, within a $72,000 total. An employee can defer the same $24,500 but depends on the employer for anything more. Every dollar contributed comes off income tax. See Solo 401(k) vs SEP-IRA for the limits at each income.
A contractor's laptop, software, home office, phone and business mileage come off profit before either tax is charged, so each $1,000 of real expenses saves both self-employment tax and income tax. Employees generally cannot deduct unreimbursed job expenses on their federal return. The deductions calculator shows what each $1,000 saves at your income.
Seen from the other side, a $75,000 employee costs an employer more than $75,000. The employer pays a matching $5,738 of Social Security and Medicare, federal unemployment tax of $42 in most states (0.6% of the first $7,000 of wages after the usual credit), state unemployment tax, workers' compensation insurance, and whatever benefits come with the job. Hiring you on a 1099 removes all of it.
That is the budget room a higher contract rate comes out of, and it is a fair point to make when you negotiate. You are not asking for more than the job is worth. You are asking the client to pay for the costs they no longer carry.
Whether you are an employee or a contractor depends on the facts of the work, not on which form the client prefers. The IRS looks at three things: who controls how and when the work is done, who controls the business side (tools, expenses, the chance of profit or loss), and how the relationship works (benefits, permanence, whether the work is a core part of the business). Some states, including California, use a stricter test.
If a client treats you like an employee but pays you on a 1099, you can ask the IRS for a ruling on Form SS-8. If you were misclassified and meet one of its conditions (having filed Form SS-8 is one), Form 8919 lets you pay only the employee's half of Social Security and Medicare on that income instead of the full self-employment tax.
The independent contractor calculator shows the W-2 salary your contract income is worth, for your own income, expenses, filing status and state.
Compare W-2 and 1099 →On the same $75,000, a single 1099 contractor in a state with no income tax pays $3,693 more in 2026: $17,101 against $13,408. The difference is the employer's half of Social Security and Medicare, partly offset by deducting half of self-employment tax.
About 7.5% more net profit gives the same take-home as a salary anywhere from $40,000 to $175,000. A $75,000 salary takes $80,646 of profit. If you also replace $10,000 a year of employer benefits, you need $95,931.
No. With no state income tax, a single filer takes home $61,593 from a $75,000 salary and $57,899 from $75,000 of 1099 profit, before counting any benefits the job includes.
Partly. At $75,000 of profit it saves a single filer $1,607 of federal income tax, leaving the contractor $2,086 behind the employee. It does not reduce self-employment tax, so some gap always remains.
About $50.40 an hour over 1,600 billable hours to match the take-home, or $59.96 if you also replace $10,000 of benefits. The salary itself works out to $36.06 an hour over 2,080 paid hours.
Figures come from the same 2026 engine as the calculator: IRS Revenue Procedure 2025-32 brackets and standard deduction, the $184,500 Social Security wage base, and no state income tax unless stated. See the methodology. For informational purposes only; consult a CPA for your situation.