How to Price a Contractor Bid in 2026 (With OBBBA Tax Rules)

Why Most Solo Contractors Underprice Their Bids

The most common mistake solo contractors make is pricing a job based on materials plus a gut-feel markup. That approach ignores overhead, self-employment tax, and the new 2026 OBBBA deductions that change your effective tax rate — sometimes dramatically.

A properly priced bid covers five things: direct labor, materials, overhead, self-employment tax, and profit. Miss any one of them and you are effectively working for less than your target hourly rate.

The 2026 OBBBA Tax Changes That Affect Your Bid

The One Big Beautiful Budget Act (OBBBA) introduced three key changes for 2026 that directly affect how solo contractors should price their work:

• $16,100 standard deduction — The inflation-adjusted standard deduction for 2026, per IRS Revenue Procedure 2025-32. This is the baseline deduction every solo contractor gets before itemizing.
• $12,500 overtime premium deduction cap — Solo contractors who work overtime hours can deduct up to $12,500 of overtime premium pay from gross income. This is a new above-the-line deduction that reduces your taxable income before the standard deduction.
• $40,400 SALT cap — The state and local tax deduction cap increased to $40,400 for 2026. If you itemize and pay significant state income or property taxes, this may make itemizing more valuable than the standard deduction.

How to Build a Bid That Accounts for These Rules

Here is the step-by-step framework the SoloBid Estimator uses:

1. Calculate your target hourly rate. Start with your desired annual income, add self-employment tax (15.3% on net earnings), subtract the $16,100 standard deduction and any overtime premium deduction, then divide by your billable hours per year.
2. Estimate direct labor hours. Be honest. Most contractors underestimate by 20–30%. Add a 15% buffer for scope creep.
3. Price materials at cost plus markup. A 15–20% materials markup is standard and covers your time sourcing, transporting, and managing materials.
4. Add overhead allocation. Divide your annual overhead (truck, tools, insurance, phone, software) by your annual billable hours to get an overhead rate per hour. Add this to every bid.
5. Add profit margin. Overhead recovery is not profit. Add a separate 10–15% profit margin on top of all costs.

Example: Pricing a Bathroom Remodel in 2026

Suppose you want to net $75,000/year working 1,500 billable hours. Your annual overhead is $18,000. Here is how the math works:

• Target gross income: $75,000 + SE tax ($75,000 × 0.153 / 1.9235) ≈ $81,000
• Less standard deduction: $81,000 − $16,100 = $64,900 taxable
• Overhead rate: $18,000 ÷ 1,500 = $12/hr
• Labor rate: ($81,000 ÷ 1,500) + $12 = $54 + $12 = $66/hr all-in
• For a 40-hour bathroom remodel: 40 × $66 = $2,640 labor
• Materials at $3,200 + 18% markup = $3,776
• Subtotal: $6,416 + 12% profit = $7,186 bid

Use the SoloBid Estimator to run these calculations instantly with your own numbers.

Common Bid Pricing Mistakes to Avoid

• Not accounting for SE tax. Self-employment tax is 15.3% on the first $168,600 of net earnings. It is the single biggest expense most solo contractors forget to price in.
• Pricing materials at retail. You should be marking up materials. Your time sourcing and managing materials has value.
• Ignoring slow seasons. If you only bill 900 hours in a year instead of 1,500, your overhead rate doubles. Price for your realistic billable hours, not your optimistic ones.
• Forgetting the overtime premium deduction. If you work overtime hours, the new $12,500 OBBBA deduction can meaningfully reduce your tax bill — but only if you track your hours and claim it.