Worked example
To take home $70,000 with $6,000 of costs, a single freelancer needs to bill $95,016 a year. Working 46 weeks of 40 hours but billing 60% of them gives 1,104 billable hours, so the minimum rate is $86.07 an hour.
Why salary divided by 2,080 is wrong
A full-time job is 2,080 paid hours a year, including holidays and vacation. As a freelancer you are paid only for hours a client is billed for. Time spent finding work, sending invoices, learning and doing admin is unpaid, and so are your weeks off.
You also pay your own self-employment tax, buy your own equipment and fund your own retirement. That is why freelance rates are often 1.5 to 2 times what an employee in the same role earns per hour.
The formula
Required revenue = take-home goal + business expenses + retirement savings + taxes on the profit. Billable hours = (52 weeks − weeks off) × hours per week × billable share. Hourly rate = required revenue ÷ billable hours.
The calculator solves the tax part exactly, because tax depends on revenue and revenue depends on tax. It uses 2026 federal income and self-employment tax but not state tax, so add a little if your state taxes income.
Choosing your billable share
| Situation | Typical billable share |
|---|---|
| New freelancer still building a client list | 40 to 50% |
| Established, steady clients | 60 to 70% |
| Long contracts through an agency | 75 to 85% |
Be honest here. Overestimating billable hours is the most common reason freelancers undercharge.
Turning the number into prices
- Use it as a floor. It is the least you can charge to meet your goal, not what the work is worth.
- Quote projects, not hours, when you can. Estimate the hours, multiply by your rate, add a buffer for revisions.
- Check the market. If your floor is above what clients pay, cut costs, raise your billable share or specialise in better-paid work.
Common questions
What is a good hourly rate for a beginner freelancer?
Work out your floor with this calculator, then compare with rates for your skill and location. Charging below your floor means you are paying to work.
How many billable hours does a freelancer work per year?
Usually 1,000 to 1,500. Forty hours a week for 46 weeks is 1,840 hours, but sales, admin and gaps between projects take a large share.
Should I charge a day rate instead?
Day rates suit work that fills whole days, such as workshops or on-site projects. A day rate of eight times your hourly rate is a starting point, and many freelancers discount it slightly.
Does this include state tax?
No. Add your state's income tax rate to your expenses or raise the result slightly.
Official sources: IRS: Self-employment tax. This calculator gives estimates for planning, not tax advice. Read the disclaimer.