Freelance Hourly Rate Calculator
Calculate exactly what you need to charge to meet your financial goals.
How to Calculate Your Freelance Rate: A Complete Guide
Setting your freelance rate is one of the most stressful parts of starting a business. Charge too little, and you'll burn out working long hours for low pay. Charge too much without justifying your value, and you might struggle to land clients. This guide breaks down the "Backwards Math" method to ensure you cover your life, your business, and your future.
1. Start with Your Desired Take-Home Pay
Unlike a salary, your freelance revenue isn't yours to keep. You need to start with the "Net Income" you want to have in your bank account after all business expenses and taxes are paid. If you want to live a $60,000/year lifestyle, that is your baseline.
2. Accounting for Business Expenses
As a freelancer, you are the business. You are responsible for:
- Software subscriptions (Adobe, Zoom, CRM)
- Hardware (Laptop, monitors, office furniture)
- Health insurance and retirement contributions
- Marketing and website hosting
- Professional services (Accountants, lawyers)
3. The "Tax and Buffer" Trap
Self-employed individuals must pay both the employer and employee portions of social security and medicare taxes. Depending on your location, you should set aside 20% to 35% of your gross income for taxes. Our calculator includes a "Profit Buffer" here as well—because a business should make a profit above and beyond just paying your salary.
4. Calculating Billable vs. Non-Billable Hours
This is where most freelancers fail. You cannot bill 40 hours a week. You have to spend time on:
- Invoicing and bookkeeping
- Finding new clients (Lead generation)
- Learning new skills
- Administrative tasks
Most successful freelancers find that only 20 to 30 hours per week are actually "billable" to a client. Furthermore, you must account for the days you don't work, such as federal holidays, sick days, and much-needed vacations.
Practical Example
If you want to take home $50,000, have $5,000 in expenses, and want to save 25% for taxes, you need roughly $68,750 in total revenue. If you work 25 billable hours a week for 47 weeks a year (taking 5 weeks off for holidays/vacation), you have 1,175 billable hours. $68,750 divided by 1,175 hours equals a rate of approximately $58.50 per hour.
Frequently Asked Questions
Should I charge hourly or per project?
Hourly is great for beginners or projects with shifting scopes. Project-based pricing is better as you become faster, as it rewards efficiency rather than "time spent." However, you should still use your hourly rate to calculate your project quotes.
When should I raise my rates?
At a minimum, raise your rates once a year to account for inflation. You should also raise rates when your schedule is 80% full or when you have significantly upgraded your skills or portfolio.