Freelance Hourly Rate Calculator
Calculate exactly what you need to charge to hit your income goals after taxes and expenses.
How to Calculate Your Freelance Hourly Rate
Transitioning from a traditional 9-to-5 to freelancing requires a fundamental shift in how you view your "salary." Unlike an employee, a freelancer is a business entity responsible for its own overhead, equipment, health insurance, and taxes. If you simply divide your old salary by 2,000 hours (the standard work year), you will likely find yourself underpaid and overworked.
This Freelance Hourly Rate Calculator uses the "Bottom-Up" approach. We start with the amount of money you want to take home, add your costs of doing business, account for the taxman, and then divide that total by the actual hours you will be working.
The Math Behind the Calculator
To find your ideal rate, we follow these specific steps:
- Step 1: Gross Income Goal. We calculate how much you need to earn before taxes to keep your desired net salary. Formula: Desired Salary / (1 – Tax Rate).
- Step 2: Total Revenue Requirement. We add your annual business expenses (software, hardware, office rent, marketing) to your gross income goal.
- Step 3: Billable Capacity. We subtract your vacation and sick weeks from the 52 weeks in a year, then multiply by your billable hours per week. Remember: "Billable" hours are only the hours spent on client work, not administrative tasks or marketing.
- Step 4: The Final Rate. We divide the Total Revenue Requirement by the Billable Capacity and add a small overhead buffer for unexpected costs.
Real-World Example
Let's say you want to take home $70,000 a year. You have $5,000 in annual expenses and face a 30% tax rate. You plan to take 4 weeks of vacation and can realistically bill 25 hours per week (the rest of the time is spent on sales and admin).
2. Total Revenue Needed: $100,000 + $5,000 = $105,000
3. Working Weeks: 52 – 4 = 48 weeks
4. Annual Billable Hours: 48 * 25 = 1,200 hours
5. Hourly Rate: $105,000 / 1,200 = $87.50/hr
Why Billable Hours are Key
One of the most common mistakes new freelancers make is assuming they will work 40 billable hours a week. In reality, most successful freelancers find that 20 to 25 hours is the "sweet spot." The remaining 15-20 hours are consumed by "non-billable" activities like writing proposals, bookkeeping, learning new skills, and networking. If you base your rate on a 40-hour billable week, you will effectively be cutting your intended salary in half.
When to Increase Your Rates
You should reconsider your hourly rate at least once a year. Common triggers for a rate hike include:
- Your schedule is consistently 100% booked for more than 3 months.
- You have gained a specialized certification or mastered a high-demand tool.
- Your cost of living or business expenses have increased due to inflation.
- You have accumulated significant case studies and testimonials that prove your ROI to clients.