Freelance Hourly Rate Calculator

This freelance hourly rate calculator works backwards from the income you want to keep. Enter that income, your yearly business expenses, your tax rate and the hours you can bill. It returns the lowest hourly rate that covers all four, with a day rate and the revenue you need per month and per year.

How the Freelance Hourly Rate Is Calculated

Take a goal of $75,000 take-home with a 25% tax rate. You need 75,000 ÷ 0.75 = $100,000 of profit before tax. Add $6,000 of business expenses and the revenue needed is $106,000. At 48 working weeks and 25 billable hours a week you have 1,200 hours to sell, so the rate is 106,000 ÷ 1,200 = $88.33 an hour. The day rate is $706.67 and the monthly target is $8,833.33.

Expenses are added after the tax step because business expenses are paid out of revenue before profit is taxed.

Billable Hours Change the Rate More Than Anything Else

The table keeps the $106,000 revenue target and 48 working weeks and changes only the billable hours per week.

Billable hours are the ones you invoice. Finding clients, writing quotes, invoicing, email and training all take time and bring in nothing directly. The Billable Hours Calculator shows what share of your working time is billed.

Why a Salary Divided by 2,080 Hours Is Too Low

A common shortcut is to divide a salary by 2,080, which is 52 weeks of 40 hours. For $75,000 that gives $36.06 an hour. It is too low for a freelancer for three reasons.

• Not every hour is billed. An employee is paid for all 2,080 hours, including holidays and quiet days. A freelancer is paid for billed hours only.
• Expenses come out of revenue. Software, equipment, insurance and accounting are paid by the business, which is you.
• Tax is handled differently. In the US a self-employed person pays self-employment tax of 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare, in addition to income tax. An employer pays part of these taxes for an employee. The rate is on the IRS self-employment tax page.

Tax rules differ by country, so enter the rate that applies to you. The Freelance Tax Calculator estimates US tax on self-employment income.

What the Result Does Not Include

• Weeks without work. The rate assumes every planned billable hour is sold. If you expect gaps, lower the working weeks or the billable hours.
• Unpaid invoices. Revenue here means money invoiced and collected.
• Benefits you used to get from an employer. Health insurance, retirement contributions and paid leave are yours to pay for. Add them to expenses or to the income goal.
• The market. The result is what you need, not what clients pay for your kind of work.

To turn the rate into a fixed price for a job, use the Project Quote Calculator.

How to Use the Freelance Hourly Rate Calculator

1. Enter the income you want to keep: Type the yearly amount you want left after tax and business expenses.
2. Enter your business expenses: Type what the business costs to run for a year: software, insurance, equipment, accounting and similar.
3. Enter your tax rate: Type the share of your profit that goes to income tax and self-employment tax or social contributions.
4. Enter your billable time: Type the weeks you work in a year and the hours per week you can invoice a client for.
5. Read the result: The calculator shows the minimum hourly rate, a day rate, billable hours per year and the revenue you need.

Frequently Asked Questions