Freelance Hourly Rate Calculator
Determine exactly what you need to charge to meet your income goals.
*This rate covers your salary, taxes, expenses, and profit margin.
Why You Need a Specialized Freelance Hourly Rate Calculator
Transitioning from a salaried employee to a freelancer or consultant is a liberating career move, but it comes with a complex financial challenge: pricing your services correctly. Unlike a traditional paycheck, your freelance rate must account for much more than just the time you spend working. Many new freelancers make the critical mistake of simply dividing their previous annual salary by 2,080 (the standard number of work hours in a year), resulting in a rate that effectively pays them far less than minimum wage once overhead is factored in.
This Freelance Hourly Rate Calculator is designed specifically to help creative professionals, consultants, and independent contractors reverse-engineer their pricing. By starting with your desired net income and factoring in the "hidden" costs of running a business—such as self-employment taxes, unpaid vacation time, and non-billable administrative hours—you can confidently quote rates that ensure your business remains sustainable and profitable.
How to Calculate Your True Hourly Rate
To use this calculator effectively, you need to understand the components that make up a healthy freelance rate:
1. Desired Annual Net Income
This is the "take-home" pay you want to generate to cover your personal lifestyle costs (rent, food, savings). Think of this as the salary you would pay yourself.
2. Business Overhead (Expenses)
Freelancers must pay for their own equipment, software subscriptions, internet, co-working spaces, and marketing. Even if you work from home, these costs add up. A typical freelancer might spend $200–$1,000 monthly on overhead.
3. The Tax Burden
As an employee, your employer pays half of your FICA taxes. As a freelancer, you pay both halves (Self-Employment Tax), plus federal and state income tax. Depending on your location, this can range from 20% to 40% of your gross income. Our calculator grosses up your revenue requirement so that after you set aside taxes, you still hit your net income goal.
4. Billable vs. Non-Billable Hours
You cannot bill for every hour you work. You will spend time invoicing, finding clients, answering emails, and marketing. A realistic freelancer might work 40 hours a week but only bill for 20 to 25 of them. Calculating your rate based on 40 billable hours will lead to underpricing.
The Formula Behind the Calculation
The math used in this tool ensures you don't come up short at the end of the year. Here is the logic:
- Annual Overhead: Monthly Expenses × 12
- Gross Revenue Target: (Desired Salary + Annual Overhead) / (1 – (Tax Rate + Profit Margin))
- Total Billable Hours: (52 Weeks – Weeks Off) × Billable Hours Per Week
- Hourly Rate: Gross Revenue Target / Total Billable Hours
Tips for Increasing Your Rate
If the result from the calculator is higher than you expected or higher than the current market average, consider these strategies:
- Niche Down: Specialists can charge significantly more than generalists.
- Switch to Value-Based Pricing: Instead of charging by the hour, charge by the project or the value delivered to the client. Use this hourly rate as an internal benchmark to ensure the project fee is profitable.
- Reduce Non-Billable Time: Automate invoicing and scheduling to increase the number of hours you can bill each week.
Use this tool periodically to adjust your rates as your expenses change or as you gain more experience in your field.