Freelance Hourly Rate Calculator
1. Financial Goals
$
$
2. Workload Capacity
(Exclude admin/marketing time)
(Vacation + Sick days)
3. Taxes & Overhead
%
Please enter valid positive numbers for all fields.
Your Recommended Rate
Minimum Hourly Rate:
$0.00
Total Revenue Needed (Gross):
$0.00
Estimated Taxes:
$0.00
Total Billable Hours/Year:
0
How to Calculate Your Freelance Hourly Rate
Determining the correct hourly rate is one of the most significant challenges for freelancers, consultants, and independent contractors. Unlike a salaried employee, your rate must cover not just your take-home pay, but also your taxes, business expenses, insurance, and unpaid time spent on administrative tasks. This Freelance Hourly Rate Calculator uses a reverse-engineering method to ensure your pricing meets your financial lifestyle goals.
Understanding the Formula
To arrive at a sustainable hourly rate, we use the following logic based on your inputs:
- Identify Net Income Goal: We start with the amount of money you want to take home after taxes and expenses (e.g., $75,000).
- Add Overhead: We add your annual business costs (software, equipment, hosting, accounting) to your net income goal.
- Factor in Taxes: Freelancers pay self-employment tax. We calculate the gross revenue needed so that after paying your estimated tax rate (e.g., 25-30%), you are left with your target net income.
- Determine Billable Capacity: You cannot bill 40 hours a week every week. We subtract vacation weeks and sick days from the year (52 weeks). Then, we multiply the remaining weeks by your actual billable hours (hours spent doing paid work, excluding finding clients or invoicing).
- The Final Calculation: Gross Revenue Needed รท Total Billable Hours = Your Hourly Rate.
Example Calculation
Let's say you are a graphic designer with the following metrics:
- Target Take-Home Pay: $60,000
- Business Expenses: $5,000/year
- Tax Rate: 25%
- Time Off: 4 weeks/year
- Billable Hours: 20 hours/week (leaving 20 hours for admin/marketing)
Here is how the math works:
- Cash Needed (Net + Exp): $65,000
- Gross Revenue Needed (Pre-Tax): $65,000 / (1 – 0.25) = $86,666.67
- Working Weeks: 52 – 4 = 48 weeks
- Total Billable Hours: 48 weeks * 20 hours = 960 hours
- Hourly Rate: $86,666.67 / 960 = $90.28/hour
If you charged $50/hour thinking it was a "good wage," you would drastically underperform your financial goals.
Why Billable Hours Matter
New freelancers often mistake "working hours" for "billable hours." If you work 40 hours a week, you might only spend 20 to 25 of those hours actually working on client projects. The rest is spent on:
- Emailing and communication
- Marketing and business development
- Invoicing and accounting
- Skill development
Always input a conservative number for "Billable Hours per Week" in the calculator to ensure your rate buffers the unpaid time you spend running your business.