How do I calculate my freelance hourly rate?

Work backwards from take-home. Add overhead and tax as a share of gross, keep the rest, and divide your target income by that fraction to get the gross you must bill; then divide by your real billable hours. At the defaults that is $80,000 / 0.45 = $177,778 gross over 1,536 billable hours, or about $115.74 an hour.

How many hours can I actually bill?

Realistically 1,200 to 1,600 a year (about 25-32 per week across 48 weeks) even for full-time freelancers; the rest goes to proposals, admin, learning and holidays. Quoting on nominal desk hours is the classic underpricing error, because it silently assumes every hour is sold.

What tax percentage should I enter?

US sole proprietors pay 15.3% self-employment tax plus federal income tax and usually state income tax, commonly 30% to 40% combined. Enter your realistic total; the engine's job is to make that burden explicit in the rate rather than hide it.

Should I charge hourly or by project?

Projects price the value you create and reward efficiency; hourly rewards slowness and punishes expertise. Most freelancers set an internal hourly rate for estimating, then quote projects from it — the calculator gives that internal floor either way.

Why is the rate so much higher than my old salary?

Because you now pay the self-employment tax, carry overhead, and work unpaid admin and selling time that an employer covered. At a 55% combined overhead-and-tax burden you keep only about 45 cents of each billed dollar, which is exactly why the gross must be more than double your take-home.

What if I cannot charge that rate?

Reduce overhead, raise your specialisation, or cut non-billable hours — those move the floor down. Simply working more hours at a rate below the floor still loses money, because the business is subsidising the client on every hour.

Freelance Rate Calculator

How it works

The most expensive freelance mistake is quoting a rate pulled from an employee salary. An employee earning $80,000 costs the employer about $95,000 once payroll taxes are included, and that employee never pays self-employment tax, never carries overhead, and never works unpaid weeks of admin and selling. A freelancer must cover all of that from the same number, so the rate that funds a given take-home income is far higher than salary math suggests. This calculator works backwards from the income you want to keep: it adds overhead and tax together as a share of the gross you will bill, then divides your target take-home by the fraction of that gross you actually keep. With 25% overhead and 30% combined tax you keep 45 cents of every billed dollar, so to take home $80,000 you must bill about $177,778 — before accounting for the hours you can really sell. The rate is that gross divided by your billable hours: 48 weeks times 32 hours is 1,536 billable hours a year, which puts the floor at about $115.74 an hour. The billable-hours input is where most plans quietly fall apart. Of roughly 2,080 working hours a year, proposals, admin, learning, invoicing and holidays usually leave 1,200 to 1,600 that a client will actually pay for, and quoting on the full 2,080 underprices every job by about a third. The figure the tool shows is a floor, not a price: experienced freelancers set their internal floor, then charge above it for scarcity, expertise and the value they create, and negotiate down from there, because charging below the floor means the business subsidises the client. Every input earns its place. Desired take-home is the number you need to live on after tax. Overhead is software, insurance, marketing and equipment as a percentage of what you bill. The tax field is your combined self-employment and income tax — 15.3% in SE tax alone IRS, plus federal and usually state income tax, commonly 30% to 40% all in for US sole proprietors. Billable weeks and hours per week should be your realistic sellable capacity, not your desk time. Two sensitivities are worth running before you trust the number. First, hours: at 32 billable hours a week the floor is $115.74, at 40 it drops to about $92.70 because the same gross spreads over more sold time, so protecting billable hours protects your rate more directly than raising it. Second, the tax and overhead stack: drop the combined burden from 55% to 40% and the gross you need falls to about $133,333, cutting the floor to roughly $86.81 — reigning in overhead or structuring as an S-corp to lower payroll tax can move the rate almost as much as a pricing change. The multiplier the tool reports, gross divided by take-home at about 2.22 here, is the honest size of the gap between what you bill and what you keep, and it is the number that shocks most new freelancers into pricing correctly. None of this replaces the market: if you cannot charge the floor, the answer is usually less overhead, more specialised skills, or fewer non-billable hours, not simply working more. Round the figure up when you quote — $115.74 reads better at $120 — and revisit it every year, because tax brackets, overhead and your own skill all move.

Formula


                keep fraction = 1 - (overhead % + tax %) / 100     (share of gross you actually keep)
required gross = desired take-home / keep fraction
rate per hour  = required gross / (billable weeks x hours per week)
multiplier = required gross / desired take-home

Worked example — $80,000 take-home, 48 weeks, 32 hr/wk, 25% overhead, 30% tax
  keep fraction   = 1 - (25 + 30)/100       = 0.45
  required gross  = 80,000 / 0.45           = $177,777.78
  billable hours  = 48 x 32                 = 1,536
  rate per hour   = 177,777.78 / 1,536      = $115.74
  multiplier      = 177,777.78 / 80,000     = 2.2222

Sensitivity
  40 billable hr/wk: 48 x 40 = 1,920 hrs => rate = 177,777.78 / 1,920 = $92.70
  tax+overhead 40%: keep 0.60 => gross 133,333.33 => rate = $86.81
  52 wk x 40 hr: 2,080 hrs => rate = 177,777.78 / 2,080 = $85.47

Tips

Round up when you quote — $115.74 should be billed at $120; the round number reads as a pro and builds in a small cushion.
Track real billable hours for a month before setting the rate; the desk-hours estimate is almost always optimistic by about a third.
If you cannot charge the floor, fix overhead or specialisation, not hours — more hours at a loss is still a loss.
Self-employed US filers pay 15.3% SE tax plus income tax, commonly 30-40% combined; enter your real total so the rate is honest.

Frequently asked questions

How do I calculate my freelance hourly rate?: Work backwards from take-home. Add overhead and tax as a share of gross, keep the rest, and divide your target income by that fraction to get the gross you must bill; then divide by your real billable hours. At the defaults that is $80,000 / 0.45 = $177,778 gross over 1,536 billable hours, or about $115.74 an hour.
How many hours can I actually bill?: Realistically 1,200 to 1,600 a year (about 25-32 per week across 48 weeks) even for full-time freelancers; the rest goes to proposals, admin, learning and holidays. Quoting on nominal desk hours is the classic underpricing error, because it silently assumes every hour is sold.
What tax percentage should I enter?: US sole proprietors pay 15.3% self-employment tax plus federal income tax and usually state income tax, commonly 30% to 40% combined. Enter your realistic total; the engine's job is to make that burden explicit in the rate rather than hide it.
Should I charge hourly or by project?: Projects price the value you create and reward efficiency; hourly rewards slowness and punishes expertise. Most freelancers set an internal hourly rate for estimating, then quote projects from it — the calculator gives that internal floor either way.
Why is the rate so much higher than my old salary?: Because you now pay the self-employment tax, carry overhead, and work unpaid admin and selling time that an employer covered. At a 55% combined overhead-and-tax burden you keep only about 45 cents of each billed dollar, which is exactly why the gross must be more than double your take-home.
What if I cannot charge that rate?: Reduce overhead, raise your specialisation, or cut non-billable hours — those move the floor down. Simply working more hours at a rate below the floor still loses money, because the business is subsidising the client on every hour.

Your details

How it works

Formula

Tips

Frequently asked questions