Determine exactly what you need to charge to meet your income goals.
Total Billable Hours (Yearly):0
Total Overhead + Tax Buffer:$0.00
Gross Revenue Needed:$0.00
Minimum Hourly Rate:$0.00
function calculateRate() {
// Get input values
var targetSalary = parseFloat(document.getElementById('targetSalary').value);
var monthlyExpenses = parseFloat(document.getElementById('monthlyExpenses').value);
var billableHours = parseFloat(document.getElementById('billableHours').value);
var weeksOff = parseFloat(document.getElementById('weeksOff').value);
var taxRate = parseFloat(document.getElementById('taxRate').value);
var profitMargin = parseFloat(document.getElementById('profitMargin').value);
// Validation
if (isNaN(targetSalary) || isNaN(monthlyExpenses) || isNaN(billableHours) || isNaN(weeksOff) || isNaN(taxRate) || isNaN(profitMargin)) {
alert("Please fill in all fields with valid numbers.");
return;
}
// Calculation Logic
// 1. Calculate Total Working Weeks
var workingWeeks = 52 – weeksOff;
// 2. Calculate Total Annual Billable Hours
var totalBillableHours = workingWeeks * billableHours;
// 3. Calculate Annual Business Expenses
var annualExpenses = monthlyExpenses * 12;
// 4. Calculate Gross Revenue Needed
// Formula: (Target Net Salary + Annual Expenses) / (1 – Tax Rate % – Profit Margin %)
// Note: Tax and profit are calculated based on the Gross Revenue, not the Net.
var divisor = 1 – ((taxRate + profitMargin) / 100);
if (divisor <= 0) {
alert("Tax Rate and Profit Margin combined cannot be 100% or more.");
return;
}
var grossRevenueNeeded = (targetSalary + annualExpenses) / divisor;
// 5. Calculate Hourly Rate
var hourlyRate = grossRevenueNeeded / totalBillableHours;
// 6. Calculate Overhead/Tax Buffer amount for display
var overheadAndTax = grossRevenueNeeded – targetSalary;
// Display Results
document.getElementById('displayHours').innerText = totalBillableHours.toLocaleString();
document.getElementById('displayOverhead').innerText = "$" + overheadAndTax.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayRevenue').innerText = "$" + grossRevenueNeeded.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayRate').innerText = "$" + hourlyRate.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Show result div
document.getElementById('calcResult').style.display = 'block';
}
Understanding Your Freelance Hourly Rate
Setting the correct hourly rate is one of the most critical challenges for freelancers, consultants, and independent contractors. Unlike a traditional salary where taxes and overhead are handled by the employer, a freelancer must price their services to cover not just their desired take-home pay, but also self-employment taxes, health insurance, software costs, and unbillable time.
Why "Target Salary" Isn't Enough
Many new freelancers make the mistake of simply dividing their previous annual salary by 2,080 (the standard number of work hours in a year). This calculation is fundamentally flawed for two reasons:
Billable vs. Non-Billable Hours: You cannot bill for 40 hours a week, 52 weeks a year. You spend time on marketing, invoicing, administration, and professional development. Most successful freelancers average between 20 to 30 billable hours per week.
The Overhead Burden: Your rate must subsidize your equipment, software subscriptions, office space (or home office costs), and lack of paid time off.
The Impact of Taxes and Profit Margin
Self-employment tax significantly impacts your bottom line. In many jurisdictions, you are responsible for both the employer and employee portions of social security and medicare taxes. Additionally, adding a profit margin (input above) ensures your business accumulates retained earnings for future growth or lean months, rather than just covering your personal living expenses.
How to Use This Calculator
This tool uses a "Reverse Income" methodology. Instead of guessing a rate, we start with your financial goals:
Target Annual Net Income: The actual cash you want in your pocket before taxes but after business expenses.
Expenses & Taxes: We calculate the gross revenue required to pay these liabilities.
Capacity: We divide that gross revenue by your realistic billable capacity to find your "Break-Even" and "Profit" hourly rates.
Use the result as your baseline. Depending on your market niche and expertise, you may be able to charge a premium above this calculated floor.