Freelance Hourly Rate Calculator
Calculate exactly what you need to charge to hit your income goals and cover your business costs.
Your Recommended Hourly Rate:
How to Calculate a Sustainable Freelance Rate
Many freelancers make the mistake of simply picking a number that "sounds right" or trying to match their old corporate salary hour-for-hour. However, being self-employed comes with hidden costs that employees don't have to worry about, such as self-employment taxes, software subscriptions, insurance, and unbillable administrative time.
The "Freelance Reality" Formula
To find your true hourly rate, you must account for the following factors:
- The Tax Gap: As a freelancer, you are responsible for both the employer and employee portions of social security and medicare, plus income tax.
- Overhead: This includes your laptop, internet, office space, marketing costs, and professional services like accounting.
- Non-Billable Time: You cannot bill for 40 hours a week. You spend time on invoicing, sales calls, and professional development. Most successful freelancers aim for 20-25 billable hours per week.
- Time Off: If you don't work, you don't get paid. You must bake your vacation and sick days into your hourly rate.
Step-by-Step Calculation Example
Let's say you want to take home $60,000 a year after taxes. If your tax rate is 25%, you actually need a gross income of $80,000. If your expenses are $5,000, your total revenue goal is $85,000.
If you take 4 weeks off, you have 48 weeks to work. At 20 billable hours per week, that is 960 hours per year. Dividing $85,000 by 960 hours gives you an hourly rate of approximately $88.54.
When to Increase Your Rates
You should consider raising your rates if your schedule is consistently full, your specialized skills have increased, or your business expenses have risen. It is standard practice to review and adjust your rates annually to account for inflation and your growing expertise.