Freelance Hourly Rate Calculator
Determine exactly what to charge clients to meet your financial goals and cover your business costs.
How to Calculate Your Freelance Hourly Rate
Setting your rate is one of the most critical steps in building a sustainable freelance business. Many beginners make the mistake of simply matching a local employee's hourly wage, forgetting that as a freelancer, you are responsible for your own taxes, equipment, benefits, and non-billable time.
This calculator uses a "bottom-up" approach to ensure you don't end up underpaid. We start with your desired take-home pay and add back the costs of doing business.
The Formula We Use
To find your rate, we follow this logical flow:
- Total Gross Revenue Required: (Desired Net Salary + Business Expenses) / (1 – Tax Rate Percentage). This accounts for the fact that you must pay taxes on every dollar earned before you see the "Net" amount.
- Total Annual Billable Hours: (Weeks per Year) × (Billable Hours per Week). Remember, "billable hours" are not the same as "working hours." You cannot charge clients for time spent on bookkeeping, marketing, or answering general emails.
- The Rate: Gross Revenue / Total Billable Hours.
Practical Example: The Graphic Designer
Imagine Sarah wants to take home $60,000 a year. Her business expenses (Adobe Suite, laptop, coworking space) cost $10,000. She estimates a 25% tax rate. She wants 4 weeks of vacation (48 weeks total) and can realistically bill 20 hours per week.
- Total Revenue Needed: ($60,000 + $10,000) / 0.75 = $93,333
- Total Billable Hours: 48 weeks * 20 hours = 960 hours
- Resulting Hourly Rate: $93,333 / 960 = $97.22/hr
The Trap of "Billable Hours"
A common pitfall is assuming a 40-hour billable work week. In reality, most freelancers spend 30-40% of their time on administrative tasks, lead generation, and professional development. If you bill for 40 hours but only have 25 hours of client work, you will quickly fall behind your financial goals. Use this calculator to be honest about your capacity.
Why Taxes Matter
When you are an employee, your employer pays a portion of your payroll taxes. As a freelancer, you pay the full amount (Self-Employment Tax in the US). Always consult with a CPA, but setting aside 25-30% of your gross income for taxes is a standard rule of thumb to avoid a massive surprise at the end of the fiscal year.