How do you calculate a freelance hourly rate?

Add your desired annual take-home income to your annual business expenses, divide by (1 − your tax rate) to find required revenue, then divide that by your realistic billable hours per year. For example: ($75,000 income + $6,000 expenses) ÷ (1 − 0.25) = $108,000 required revenue. At 1,200 billable hours/year, that's $90/hour.

Why isn't billable hours per week just 40?

Most freelancers only bill 50%–70% of a standard work week — the rest goes to admin, invoicing, proposals, marketing, and finding new clients. Basing your rate on a full 40-hour week when you only actually bill 25 hours will leave you far short of your income goal.

Should I include vacation and sick days in this calculation?

Yes — unlike a salaried job, unpaid time off directly reduces a freelancer's income unless it's priced in ahead of time. Subtracting vacation, sick days, and holidays from the standard 52 weeks (commonly landing around 44–48 working weeks) keeps the rate realistic.

Is this rate the minimum I should charge or the ideal rate?

It's a floor, not a target. This calculation covers your income goal exactly with zero cushion for slow months, non-paying clients, or unplanned expenses. Many freelancers add 15%–20% on top of this number as a buffer.

Freelance Hourly Rate Calculator

(Income-Based Pricing Tool)

Work backward from your income goal, expenses, and tax rate — combined with realistic billable hours, not a fantasy 40-hour week — to your minimum viable freelance hourly rate.

Step 1 — Income & Overhead

Desired Annual Take-Home Income ($)

What you want left in your pocket after taxes and business costs

Annual Business Expenses ($)

Software, insurance, equipment, coworking, accounting fees

Self-Employment Tax Rate (%)

Combined federal + self-employment tax estimate — ~25–30% is typical in the US

Step 2 — Realistic Billable Time

Working Weeks per Year

52 minus vacation, sick days, and holidays

Billable Hours per Week

Only client-billed work — not admin, sales, or emails. Most freelancers bill 20–30 of a 40-hour week.

Calculated Results

Enter your income goal and billable hours to calculate your minimum hourly rate.

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Why "Salary ÷ 2,080 Hours" Undercharges Every Freelancer

A freelance hourly rate calculator has to account for something a salary calculator never does: unbilled time. A full-time employee is paid for all 2,080 hours in a working year. A freelancer is only paid for the hours a client actually signs off on — everything else (admin, proposals, invoicing, slow periods) comes out of their own pocket in lost income.

Hourly Rate = (Desired Income + Expenses) ÷ (1 − Tax Rate) ÷ Billable Hours per Year

Worked Example

A freelance designer wants $75,000 take-home, spends $6,000/year on software and insurance, and estimates a 25% effective tax rate. They work 48 weeks/year and realistically bill 25 hours/week.

Required revenue: ($75,000 + $6,000) ÷ (1 − 0.25) = $108,000
Billable hours/year: 48 × 25 = 1,200 hours
Minimum hourly rate: $108,000 ÷ 1,200 = $90/hour

Notice that if this same freelancer assumed a full 40 billable hours/week instead of 25, the calculator would suggest just $56.25/hour — a rate that would leave them roughly $40,000 short of their actual goal once the real admin overhead shows up.

Frequently Asked Questions (FAQ)

A billable hour is time a client agrees to pay for — actual project work under a signed scope or contract. Time spent writing proposals, chasing invoices, marketing yourself, or doing your own bookkeeping is real work, but it's not billable, which is exactly why it has to be priced into the rate for the hours that are.

That gap usually means one of three things needs to change: the income goal needs to come down, billable hours per week need to go up (fewer non-billable admin hours), or the target clientele needs to shift toward work that can support the rate this math actually requires.