How do I calculate my freelance hourly rate?

Start with your desired annual take-home pay. Work backwards by adding your expected taxes (self-employment tax + income tax), business expenses, and a profit buffer. Then divide by your actual billable hours per year — not a 40-hour week, since freelancers typically spend 20-30% of time on non-billable admin and sales.

What is self-employment tax for freelancers?

Self-employment (SE) tax is 15.3% — covering 12.4% Social Security and 2.9% Medicare — applied to 92.35% of your net self-employment income. As an employee, your employer pays half of this; as a freelancer, you pay all of it. The IRS does allow you to deduct 50% of SE tax from your gross income, which partially offsets the cost.

Why should I charge more than my current salary divided by 2080 hours?

Because as a freelancer you pay both halves of FICA (15.3% vs 7.65% as an employee), you get no paid vacation or sick leave, you spend 20-30% of your time on non-billable work, and you have business expenses your employer would otherwise cover. A common rule of thumb: multiply your desired salary by 1.5-2x and divide by actual billable hours.

How many billable hours should I use in my calculation?

Most freelancers bill 25-32 hours out of a 40-hour week — the rest goes to admin, marketing, client communication, and professional development. Combined with 2-4 weeks of unpaid time off per year, you'll typically have 1,100-1,500 truly billable hours annually, not the 2,080 hours a full-time employee works.

💼 Freelance & Self-Employment

Freelance Rate Calculator

Find out exactly what hourly rate you need to charge to hit your take-home pay goal — after self-employment tax, income taxes, expenses, and real billable hours.

💰 Income goal

Desired annual take-home pay ($) After-tax, after-expense income you want to pocket

🏛️ Taxes

Self-employment tax is auto-calculated at 15.3% on 92.35% of net earnings — the same method the IRS uses on Schedule SE. You also get a 50% SE tax deduction, which is factored in.

Federal income tax bracket (%)

State income tax (%) 0% for TX, FL, WA, NV, SD, WY, AK, TN, NH

⏱️ Your billable time

Billable hours per week In a 40hr week, ~25-32 hrs are typically billable

Unpaid weeks off per year Vacation + sick + slow seasons

Non-billable overhead (%) Admin, proposals, networking, etc.

🧾 Business costs & buffer

Annual business expenses ($) Software, hardware, subscriptions, home office

Profit buffer (%) Cushion for slow months & growth

Estimate only. Tax calculations use marginal rate approximations and may not reflect your full tax picture (deductions, credits, QBI deduction, etc.). Consult a tax professional for personalized advice. Results are not financial or tax advice.

Why your freelance rate is higher than you think

A common mistake is dividing your desired salary by 2,080 (40 hrs × 52 weeks). That ignores three critical differences between employment and freelancing:

Self-employment tax: As a freelancer, you pay both the employer and employee halves of FICA — 15.3% vs. 7.65% as an employee. On $80K net, that's an extra ~$6,000/year.
Non-billable time: Proposals, admin, invoicing, marketing, and professional development typically consume 20–30% of your working hours. You can't charge clients for these.
No benefits or paid leave: No employer-paid health insurance, no paid vacation, no sick days. Your rate must absorb all of this.

How this calculator works

The calculator works backwards from your desired take-home pay. It adds self-employment tax (using the IRS Schedule SE method), income taxes, and business expenses to find your required gross income. It then divides that by your actual billable hours — accounting for non-billable overhead and time off. The result is the rate you must charge just to break even, plus an optional buffer.

Frequently asked questions

How many billable hours should I assume?

Most established freelancers bill 25–32 hours out of a 40-hour week. When starting out, assume fewer — client acquisition takes significant time. At 30 billable hours and 3 weeks off, you have about 1,470 billable hours per year. Subtract 20% for overhead = ~1,176 truly billable hours.

What's the QBI deduction and should I use it?

The Qualified Business Income (QBI) deduction lets eligible self-employed individuals deduct up to 20% of qualified business income from taxable income. This calculator doesn't include it since eligibility depends on income thresholds and business type. If you qualify, your actual tax burden will be lower than shown here.

Should I use my marginal or effective tax rate?

This calculator uses your marginal (bracket) rate for the income tax component. Your effective rate will be lower since lower income is taxed at lower brackets. The result is a slightly conservative (higher) estimate — good for planning.

How should I set my profit buffer?

A 15–20% buffer covers typical slow months, client payment delays, and business reinvestment. If you're building a business (hiring subcontractors, marketing heavily), use 25–30%. If you have guaranteed long-term contracts, you can reduce it to 10%.

LedgerlyTools calculators use standard financial formulas — the same math financial professionals use. We're developers, not financial advisors. Results are estimates. See our methodology →

Freelance Rate Calculator

How does billing more change your rate?

Why your freelance rate is higher than you think

How this calculator works

Frequently asked questions