How do I calculate my freelance hourly rate?

Start with your target annual income, add business costs (taxes, health insurance, software, equipment, retirement savings), then divide by your realistic billable hours per year. This bottom-up approach prevents the most common mistake: pricing off a salaried hourly equivalent.

Why should freelancers charge more than an equivalent salary?

Employees receive benefits the employer pays for — health insurance, retirement matching, paid time off, and half of Social Security and Medicare taxes. Freelancers cover all of that themselves plus unpaid admin time, so a sustainable rate is often 1.5 to 2 times the salaried hourly equivalent.

How many billable hours per year is realistic?

A full-time year is about 2,080 hours, but after marketing, admin, proposals, vacations, and gaps between projects, most freelancers bill only 50-75% of their time. Planning around 1,000-1,500 billable hours per year is far more realistic than assuming 40 billable hours every week.

What is self-employment tax?

In the US, self-employed people pay both the employer and employee halves of Social Security and Medicare — 15.3% on net self-employment earnings (the Social Security portion caps at an annually adjusted wage base). You can deduct half of it on your income tax return, but it still needs to be priced into your rate.

Should I charge hourly or per project?

Hourly is simpler and protects you on open-ended scopes; project pricing rewards efficiency and is easier for clients to budget. Many freelancers quote projects by estimating hours at their target rate and adding a buffer for revisions and scope creep.

Freelance Rate Calculator

Stop undercharging! Calculate your true hourly rate including hidden costs like taxes, healthcare, and unpaid time. Get

Rate Calculator

Desired Annual Income (After Expenses)

What you want to take home after all expenses

Weekly Billable Hours

Hours you can bill clients per week

Tax Rate %

30%

Profit Margin %

20%

Buffer for growth, emergencies, and business development

Annual Expenses

Business Expenses

Office supplies, software, equipment, etc.

Health Insurance (Annual)

Monthly premium × 12 months

Retirement Savings (Annual)

401k, IRA, or other retirement contributions

These expenses will be added to your desired income to calculate your total revenue needs

Recommended Rates

Hourly Rate$120

Daily Rate (8 hours)$957

Monthly Retainer$12,921

Effective Take-Home$66/hr

Annual Revenue

$172,286

Working Days

240 days

Base (Income Only)$52/hr

+ Expenses$70/hr

+ Taxes (30%)$100/hr

+ Profit (20%)$120/hr

Where Your Revenue Goes

Take Home

$95,100

55.2%

Taxes

$51,686

30.0%

Business Expenses

$12,000

7.0%

Health Insurance

$6,000

3.5%

Retirement

$7,500

4.4%

Pricing Strategy Comparison

Hourly Pricing Strategy

Best for: Short-term projects, consultations, and clients who prefer predictable costs.

Recommended Rate

$120/hour

Weekly Revenue (at 30h)

$3,589

Monthly Revenue

$15,542

Pro Tips:

Consider charging in 15-minute increments for accuracy
Set a minimum billing amount (e.g., 1 hour minimum)
Charge rush rates (+50%) for urgent projects

Understanding Your Freelance Rate

Your freelance rate isn\'t just about covering expenses—it\'s about building a sustainable business. Here\'s what goes into a properly calculated rate:

Why Include These Costs?

•
Taxes: As a freelancer, you pay both employer and employee portions
•
Time Off: You don\'t get paid vacation or sick days
•
Benefits: Health insurance and retirement aren\'t provided
•
Non-billable Time: Admin, marketing, and business development

Common Pricing Mistakes

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Only calculating based on living expenses
×
Forgetting to account for taxes (big mistake!)
×
Not including a profit margin for growth
×
Underestimating non-billable hours

Remember: Your Rate is Your Minimum

The calculated rate is your baseline—the minimum you need to charge to meet your goals. You can and should charge more for specialized skills, urgent projects, or difficult clients. Your rate should grow as your expertise and reputation increase.

Frequently Asked Questions

How much should I charge as a freelancer?

Your freelance rate should cover your desired income, business expenses, taxes, and include a profit margin. A good starting point is to take your desired annual income, divide by billable hours, then add 25-50% for taxes and expenses.

What\'s the difference between hourly and project-based pricing?

Hourly pricing charges for time spent, while project-based pricing charges for outcomes delivered. Project pricing often allows for higher profits but requires accurate scope estimation. Many freelancers use hourly for discovery and project pricing for implementation.

Should I offer discounts to new clients?

Generally, no. Discounting your rate sets a precedent and can attract price-sensitive clients who may not value your work. Instead, consider offering a small scope discount or bonus deliverable to win new business while maintaining your rate integrity.

How often should I raise my freelance rates?

Review your rates every 6-12 months. Raise rates when you gain new skills, increase demand for your services, or when your current rates no longer meet your financial goals. Existing clients typically get 60-90 days notice of rate increases.

What expenses should I include in my freelance rate calculation?

Include software subscriptions, equipment depreciation, health insurance, retirement contributions, professional development, marketing costs, and a buffer for equipment replacement. Don\'t forget about your workspace costs if you work from home.

Related Financial Calculators

Income Tax Calculator

Calculate your tax obligations as a freelancer

Business Loan Calculator

Calculate loans for business equipment or expansion

Retirement Calculator

Plan retirement savings as a self-employed professional

Savings Calculator

Plan your emergency fund and business savings

Percentage Calculator

Calculate profit margins and expense percentages

Investment Calculator

Invest your freelance income for long-term growth

How it works

A freelance rate calculator finds the hourly rate you must charge to hit a target income once you account for unpaid time, business costs, and taxes. You add desired take-home, expenses, and tax to find total revenue needed, then divide by your actually-billable hours.

Freelance hourly rate

Rate = (target income + business costs + taxes) ÷ billable hours per year

billable hours: paid hours after admin, marketing, time off
business costs: software, equipment, insurance, healthcare

Worked example

Target income $80,000 + $20,000 costs/taxes
Billable ≈ 1,250 hours/year (not 2,080)

Revenue needed = $100,000
Rate = 100,000 ÷ 1,250

≈ $80/hour to net your target.

Good to know

Only a fraction of your week is billable — admin, sales, and time off mean ~1,000–1,400 paid hours/year, not 2,080.
Unlike an employee, you fund your own taxes, healthcare, equipment, and downtime — build them into the rate.
Charging by project or value can earn more than hourly once you're efficient.