How much do you want to take home?
Software, hosting, internet, insurance.
Hours actually charged to clients.
Vacation, holidays, and sick days.
Include income tax and self-employment tax.
Your Minimum Hourly Rate
$0.00
Gross Annual Goal
$0
Total Billable Hours/Year
0
Annual Expenses
$0
Estimated Taxes
$0
Stop Guessing: How to Calculate Your Freelance Rate Correctly
One of the most common mistakes new freelancers make is underpricing their services. You might think, "I earned $30/hour at my day job, so I'll charge $40/hour now." This is a recipe for burnout and financial struggle.
Unlike a salaried employee, a freelancer must cover all overhead costs, including health insurance, hardware, software subscriptions, retirement savings, and the self-employment tax burden. Furthermore, you cannot bill for every hour you work. Administrative tasks, marketing, and client acquisition are unbillable but essential.
The Freelance Rate Formula Explained
This calculator uses a reverse-engineering approach to determine your rate based on your financial goals. Here is the logic behind the numbers:
- Adjusted Gross Income Needed: We start with your desired net income (what you want to put in your pocket) and add your business expenses. Then, we divide by the inverse of your tax rate to ensure you have enough pre-tax revenue to cover your tax liabilities.
- True Billable Hours: We calculate your total working weeks (52 minus vacation/sick weeks) and multiply by your billable hours per week. Most freelancers can only bill 50-70% of their working time.
- Final Calculation: The Gross Income Needed is divided by the True Billable Hours to give you the minimum hourly rate required to sustain your lifestyle.
Why Billable Hours Matter
If you plan to work 40 hours a week, you might assume you have 2,080 billable hours a year. In reality, you will likely spend 10-15 hours a week on emails, invoicing, and finding new clients. If you only bill 25 hours a week but price yourself based on a 40-hour week, you will fall short of your income goals by nearly 40%.
Factor in the "Feast and Famine" Cycle
Freelancing is rarely consistent. The calculated rate above is a minimum baseline. It is often wise to add a 10-20% buffer to this rate to account for dry spells where you may have billable capacity but no active clients. This profit margin ensures your business remains solvent during slower months.