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Freelance hourly rate calculator
Your hourly rate needs to cover the income you want, business expenses and your tax reserve through the hours you can bill. Divide required annual revenue by annual billable hours. With a $60,000 take-home target, $12,000 expenses, a 25% tax reserve and 1,150 billable hours, that works out to $80 per hour. Replace those assumptions with your figures.
Work out your hourly 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.
How do you work out a freelance hourly rate?
Add your annual business expenses to the pre-tax profit needed for your take-home target, then divide by annual billable hours. Annual billable hours are billable hours per week multiplied by the working weeks you choose.
Count administration, finding clients, bookkeeping and unpaid preparation when deciding how much of a week you can actually bill. Do not enter all working hours unless the client pays for all of them. Reduce working weeks for holiday, sick time or planned gaps between projects.
How much should you set aside for tax?
Enough for income tax and self-employment tax together. Self-employment tax alone is 15.3% in the US (12.4% Social Security and 2.9% Medicare, per the IRS), before any income tax. Gross up your take-home target by your reserve: $60,000 ÷ (1 − 0.25) = $80,000 of profit before tax.
Use the reserve your accountant or last year’s return suggests. The common mistake is pricing from take-home pay and paying the tax out of it later, which quietly cuts the rate by a quarter.
Can you use the rate for fixed-price work?
Yes. Multiply the rate by the billable hours you expect for the agreed scope, then include any project-specific costs you have not already allowed for. Describe deliverables, revisions and payment terms so the client can evaluate the fixed quote.
Compare the finished job with the hours you allowed. If a recurring task takes longer than expected, revise the estimate for the next job. The calculated rate is a starting point for your business numbers, not a promise that a particular client will accept the price.
Example: your numbers in the calculation
Suppose you want $60,000 after your tax reserve, spend $12,000 on the business and set aside 25% of profit for taxes. You can bill 25 hours a week for 46 weeks.
The pre-tax profit target is $60,000 ÷ 0.75 = $80,000. Add $12,000 expenses for $92,000 revenue. Your 25 × 46 = 1,150 billable hours need an $80 hourly rate. Use your own tax reserve and include time for sales, admin and unpaid leave when setting billable hours.
Frequently asked questions
Should business expenses be part of my income target?
Keep them separate. Your income target is what you want to take home; expenses (software, insurance, equipment, a phone, mileage) come on top, and the rate has to cover both.
Why is my freelance rate higher than an employee hourly wage?
Because you pay for everything an employer would: the unbilled hours spent finding work and doing admin, your own equipment, time off and the employer’s half of payroll tax. A rate that looks high next to a salary is often just covering those.
Can I use this for consulting or tutoring?
Yes. Enter your own income, expenses and billable schedule. The arithmetic is the same; the realistic billable hours and project costs depend on your work.