Updated · Make This Useful
How to calculate your freelance hourly rate
Add up what the business has to bring in, then divide by the hours you can actually bill. $60,000 take-home with a 25% tax reserve needs $80,000; add $12,000 of expenses and the target is $92,000. At 25 billable hours a week for 46 weeks (1,150 hours), that is $80 an hour.
Calculate my rate
Example numbers
Billable hours exclude admin, selling and unpaid time off. The tax reserve is your planning assumption on profit after expenses, not a tax calculation.
- Revenue needed per year
- $92,000.00
- Annual tax reserve
- $20,000.00
- Billable hours per year
- 1150
Rate = [take-home target ÷ (1 − tax reserve %) + expenses] ÷ annual billable hours. Rounded up to the next cent.
What is the freelance hourly-rate formula?
Your starting hourly rate equals annual revenue needed divided by annual billable hours. The numerator pays for your business as well as your own work. The denominator counts hours clients pay for. Keep both on the same time basis: annual costs divided by annual billable hours, or monthly costs divided by monthly billable hours.
List your target pay, software, equipment, insurance, accounting and other business costs. The IRS lists a 15.3% self-employment tax rate for Social Security and Medicare, separate from income tax. The 25% reserve in the calculator is a starting point you can change. Your actual tax bill comes from your return, so set the reserve from last year's numbers once you have them.
How many hours should I expect to bill?
Count delivery work you can charge for under your agreement. Then allow time for finding clients, estimating, invoicing, bookkeeping, learning and time away. A packed calendar can still contain many hours that no client pays for. Look at a recent stretch of actual work before assuming every available hour is billable.
For a side business, start with the time you can consistently protect around your job and other commitments. Keep a separate note of unpaid revisions or calls. If those hours are becoming part of every project, either include them in the project estimate or make the agreed scope clearer. Raising a quoted hourly rate alone will not fix an estimate that omits half the work.
Can I use an employee salary as my freelance rate?
An employee wage can be a reference for a pay goal, but it is not a freelance selling price. The Bureau of Labor Statistics reports a median annual wage of $62,960 for graphic designers in May 2025. Its wage data exclude self-employed workers. Use it as a check on your pay target. A freelancer billing that wage as an hourly rate would come out well short, because the rate also has to cover expenses, tax and unbilled hours.
Use your own pay target in the calculator, then add your business costs and choose realistic billable capacity. If you use that BLS benchmark as a starting point, keep its date and occupation attached to it. A different profession, level of experience or local market may call for a different target. Your quote also needs to cover the particular scope and responsibilities of the job.
How do I turn an hourly rate into a project price?
Estimate the time for the whole deliverable: briefing, production, agreed revisions, meetings, file preparation and handoff. Multiply those estimated hours by your working rate, then add agreed project expenses. Write the deliverables and revision limits next to the project price so the client knows what they are accepting.
For a small website-copy project, include the discovery conversation, the named pages, a revision round and the final handoff. Keep extra pages, ongoing updates and unrelated marketing work outside that scope unless you price them in. If the client later adds a page, quote the change before doing the additional work. The proposal should make that next step easy to understand.
When should I change my freelance rate?
Review the rate when your costs, billable capacity or work mix changes. Compare estimated project hours with the hours you actually spent. A project that looked profitable can reveal unpaid meetings, slow approvals or repeated revisions. Identify the cause before treating every shortfall as a pricing problem.
For new clients, use the revised rate with a clear scope. For existing clients, check the current agreement and explain the change before the next piece of work is approved. You can also offer a smaller scope at the old budget. Keep your pricing work alongside your existing accounting or scheduling tool so accepted work and payment records remain easy to follow.
Example: a $80 hourly rate
The calculator starts with a $60,000 take-home target, $12,000 in annual expenses and a 25% reserve on profit. The income target before that reserve is $80,000. Adding business expenses brings the annual revenue target to $92,000.
25 billable hours a week for 46 working weeks gives 1,150 billable hours. Divide $92,000 by those hours to get $80 per hour. Change the example inputs above to fit your own pay goal, costs and available client time.
Frequently asked questions
Is a freelance hourly rate the same as take-home pay?
No. The amount you charge must also cover business expenses, unpaid work and the reserves you choose. Start with the revenue the business needs, then calculate the rate using realistic billable hours.
Should I charge hourly or by project?
Hourly pricing fits work whose scope changes as you go. A project price gives a client a clearer budget when deliverables and revisions are defined. Use your hourly calculation to check whether the project price covers the expected work.
What if the calculated rate seems too high?
Check the inputs first. Then consider a smaller deliverable, a different client market or lower costs. A lower price only works if the time, costs and responsibilities still fit the income you need.
Sources
- IRS: Self-employment tax · Checked
The 15.3% rate covers Social Security and Medicare. Income tax is separate; the example reserve is a planning input.
- U.S. Bureau of Labor Statistics: Graphic Designers · Checked
May 2025 median annual wage of $62,960. Occupational wage figures exclude self-employed workers; used only as an employee-pay reference.