Freelance Hourly Rate Calculator
Determine your ideal hourly rate based on your income goals, expenses, taxes, and billable hours for the 2026 tax year.
What this calculator does
This calculator works backwards from the income you want to the hourly rate that produces it. Enter your target annual net income, the billable hours you expect each week, the weeks you will work, and your annual business expenses, and it returns the required hourly rate, the gross revenue that rate generates, and your effective hourly rate after tax.
The gross-up is where the value sits. To land a given net figure you must cover self-employment tax at 15.3 percent on most of your profit, federal income tax on what remains after the standard deduction and the qualified business income deduction, and every business expense, all from the same billable hours. Working forwards from a rate you guessed almost always produces a number that is too low.
When to use it
Use it when setting rates for the first time, when moving from employment to freelancing, and at the start of each year when reviewing whether your rate has kept pace with costs and inflation. It is also the right check before accepting a large fixed-price project: divide the fee by the hours you honestly expect it to take and compare against the rate here.
It is equally useful for turning work down. If a client's budget implies an hourly rate below the figure the calculator produces, taking the work means subsidising them from your own income, and knowing the number makes that an easy decision rather than an anxious one.
Understanding the inputs
Target annual net income is what you want to keep after tax and after business costs, the equivalent of a salary's take-home pay. Be honest about it, including what you intend to save for retirement, since nobody is contributing on your behalf.
Billable hours per week should be the hours you invoice, not the hours you work. If you work 40 and bill 25, enter 25. Billable weeks per year should exclude holiday, illness, and the gaps between engagements; 44 to 47 is realistic. Annual business expenses should include software, equipment, insurance, professional fees, and the cost of health coverage, which is easy to overlook because it is deducted elsewhere on your return.
How is this calculated?
Your true hourly rate is calculated by taking your target net income, adding back business expenses and estimated taxes (including self-employment tax), then dividing by your total billable hours.
A worked example
Take a target net income of $90,000, business expenses of $12,000, and 25 billable hours across 46 weeks, giving 1,150 billable hours. To net $90,000 after self-employment tax and federal income tax, using 2025 figures, you need net profit of roughly $118,300.
Add back the $12,000 of expenses and required revenue is about $130,300. Divided by 1,150 hours, the rate you must charge is roughly $113 an hour. For comparison, an employee earning $90,000 gross is at about $43 an hour across 2,080 hours, so the freelance rate is more than two and a half times the naive equivalent. Drop utilisation to 20 billable hours a week, or 920 hours, and the same target requires about $142 an hour.
Limitations and assumptions
This is an estimate, not tax advice, and the IRS is the authority. It models federal tax for a single filer taking the standard deduction, with no state or local income tax, so residents of taxing states need a higher rate than shown. It also assumes you actually bill every hour you enter, which is the assumption most likely to fail.
It does not model an S-corp election, retirement contributions through a SEP-IRA or solo 401(k), the qualified business income phase-out affecting consulting and other specified service businesses at higher incomes, or the cost of late-paying clients and unbilled disputes. It gives a break-even rate against your target, with no margin for a bad quarter, so treat the output as a floor rather than a price. Sanity-check it against what comparable freelancers in your market actually charge.
Common Questions
- Why is my required rate so much higher than my old salary divided by 2,080?
- Because that division assumes every working hour is paid, no business costs, and only the employee half of payroll tax. A freelancer bills perhaps 60 percent of their hours, funds their own expenses, and pays 15.3 percent self-employment tax. Those three factors together typically require a rate two to three times the naive hourly equivalent.
- How many hours a week can I realistically bill?
- Most established freelancers bill 25 to 30 hours in a 40-hour week, a utilisation rate of 60 to 75 percent. The rest goes to prospecting, proposals, invoicing, email, and unbillable revisions. New freelancers should assume 20 or less while building a pipeline. Utilisation is the single biggest driver of the rate you need.
- Should I quote hourly, daily, or by project?
- Project pricing usually earns more, because it decouples your income from your speed and lets you charge for the value delivered rather than the time spent. Hourly is the safer choice when scope is genuinely uncertain. Whichever you quote, calculate the hourly rate underneath it so you know whether a fixed price is actually profitable.
- How do I account for health insurance in my rate?
- Treat it as a business cost even though it is deducted on your personal return rather than on Schedule C. An individual marketplace plan often runs $6,000 to $10,000 a year and family coverage far more, which across 1,200 billable hours adds $5 to $20 an hour. Leaving it out is the most common reason freelance rates are set too low.
- Should I add a buffer to the rate the calculator gives?
- Yes. The output is a break-even rate against your target, assuming everything goes to plan. Add 10 to 20 percent for late payments, scope creep, clients who disappear, and the retirement saving you should be doing without an employer match. A rate with no margin means any bad month becomes a bad year.
- Does my rate need to cover retirement saving?
- Entirely, since there is no employer contribution. A SEP-IRA or solo 401(k) lets you contribute far more than an employee 401(k) deferral limit, which is a genuine advantage, but only if the rate generates the money to contribute. Build the target contribution into your desired net income rather than hoping it appears later.
- How do I raise rates with existing clients?
- Give notice tied to a natural boundary such as a contract renewal or the start of a year, state the new rate without extensive justification, and apply it to new work first. Rates that never move fall in real terms every year. Losing your least profitable client to a rate increase is usually a positive outcome.
- Is it worth charging a lower rate to win the first clients?
- Briefly and deliberately, if at all. Discounted work anchors the client's expectation and makes later increases harder, and low-paying clients often demand the most attention. If you must discount, do it as an explicit time-limited introductory rate with a written end date rather than by quoting a permanently low number.
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