Freelance Rate Calculator

Getting an answer takes three quick steps. The tool works backward from the life you want to the rate that pays for it.

1. Enter the annual income you want to take home after tax, and your annual business expenses.
2. Enter your estimated tax rate as a percent, and the hours you can bill in a year. Count only client hours, not admin, marketing or learning time.
3. Press Calculate, or press Enter. Your hourly rate appears first and large, with your day rate, the gross income you need and what each hour pays for. Press Reset to clear the form and start over.

Be honest about billable hours. A 40 hour week is 2,080 hours a year before holidays, and most freelancers bill only about half to two thirds of that.

The formula has two stages. First, work out the gross income you need. Gross income needed = target income / (1 - tax rate) + expenses. Dividing by (1 - tax rate) grosses the income up, so that after tax is taken off, exactly your target is left. Then add your business expenses on top, so they are not paid out of your own pocket.

Second, divide by your billable hours. Hourly rate = gross income needed / billable hours. Only billable hours count, because only those hours bring money in. Dividing by all the hours you work, including admin and marketing, gives a rate that looks lower but leaves you short at the end of the year.

The tax rate you enter should cover both parts of a freelancer's tax bill, income tax and self-employment tax. In the US, self-employment tax alone is 15.3%, which is why most freelancers use a combined rate of 25% to 30%. This is an estimate for planning, not tax advice. Actual tax depends on your situation and your location.

You want to take home $60,000 a year, your business expenses are $6,000, your tax rate is 25% and you bill 1,200 hours a year. Here is exactly what the calculator does.

1. Gross before tax = $60,000 / (1 - 0.25) = $60,000 / 0.75 = $80,000. That means $20,000 goes to tax.
2. Add expenses: $80,000 + $6,000 = $86,000 gross income needed.
3. Hourly rate = $86,000 / 1,200 = $71.67 per hour. The day rate for 8 hours is $573.33.

Each hour breaks down into $50.00 of take-home pay, $16.67 of tax and $5.00 of expenses. As a check, 1,200 hours at $71.67 is $86,000 a year, which leaves $60,000 after $20,000 of tax and $6,000 of expenses.

Billable hours move the rate more than almost anything else. The table below keeps the same $86,000 gross need from the worked example and changes only the hours.

Halving your billable hours nearly doubles your rate, because the same yearly costs spread over fewer paid hours. That is why new freelancers who bill 800 hours feel underpaid at rates that would be fine at 1,400 hours. Count your real hours for a month before you trust a rate. Our salary calculator helps you compare a freelance rate against an employee salary, so you can see what the same work is worth on both sides.

Dividing by all the hours you work is the most common error. A 40 hour week sounds like 2,080 billable hours, but after holidays, admin, marketing and gaps between clients, most freelancers bill 1,000 to 1,400. Using 2,080 in the formula gives a rate that is far too low.

Forgetting tax is next. An employee's tax is taken before the money arrives, so the salary feels like the whole story. A freelancer gets the gross amount and pays the tax later, and a 25% tax rate turns a $60,000 target into an $80,000 gross need before expenses are even added.

Leaving expenses out is the third mistake. Software, equipment, internet and insurance are costs an employer would pay, and a freelancer pays them from the same revenue. Put every recurring business cost in the expenses field, even the small ones, because they add up over a year. Our budget calculator can help you list them all before you enter the total here.

Your first rate is a floor, not a ceiling. Rework the numbers every year, or whenever your costs or your hours change. If your expenses rise, if you take more time off, or if your tax rate changes, the rate that covered you last year may not cover you this year.

A good habit is to raise your rate a little each year, in line with your experience and your costs. Clients expect it, and a rate that never moves falls behind in real terms as prices rise. When you raise it, run the calculator again with the new numbers, so you can show yourself, and if needed a client, exactly what changed.

Project prices follow from the hourly rate. Multiply the rate by the hours the project needs, then add a margin for the risk that it takes longer than planned. A project priced from a rate that already covers tax and expenses is a price you can stand behind.