Find your ideal hourly rate as a freelancer. Factor in expenses, taxes, time off, and billable hours to hit your income goal.
How to Calculate Your Freelance Rate
Setting the right freelance rate requires accounting for taxes, expenses, unbillable time, and time off. Unlike employees, freelancers pay self-employment tax (15.3%) on top of income tax.
Gross Revenue Needed = (Desired Income + Expenses) / (1 - Tax Rate)
Working Weeks = 52 - Weeks Off
Total Billable Hours = Billable Hours/Week x Working Weeks
Hourly Rate = Gross Revenue / Total Billable Hours
Key Considerations
Billable vs. Total Hours: Most freelancers bill 60-70% of their working hours. The rest is spent on admin, marketing, and professional development.
Self-Employment Tax: Freelancers pay both the employer and employee portions of FICA (15.3%), plus federal and state income tax. 25-35% tax rate is common.
Benefits Cost: Include health insurance, retirement savings, and other benefits that employees typically receive from employers.
Time Off: Unlike employees, you do not get paid vacation. Account for holidays, sick days, and vacation in your weeks off.
Frequently Asked Questions
Add your desired annual take-home income to your business expenses, then divide by (1 minus your tax rate) to get gross revenue needed. Divide that by your total billable hours per year. This gives you the minimum rate to hit your income goal.
Most US freelancers should estimate 25-35% for combined self-employment tax (15.3%), federal income tax, and state income tax. High earners in high-tax states like California may need 40%+.
Most freelancers realistically bill 25-35 hours per week. The remaining time goes to admin, marketing, invoicing, and client communication. Using 30 billable hours/week is a common benchmark.
Yes. The calculated rate is your floor. Add a 15-25% buffer for scope creep, slow months, rate negotiations, and emergency savings. Also consider your experience level and market rates.
Common freelance expenses include: software subscriptions, equipment, office space/coworking, health insurance, retirement contributions, professional development, accounting/legal fees, and marketing costs.
As a freelancer, you pay self-employment tax (15.3% for Social Security and Medicare) on top of income tax. Make quarterly estimated tax payments to avoid penalties.