Freelance Hourly Rate Guide

The freelance rate formula

Hourly rate = (Income goal + Expenses + Taxes) ÷ Billable hours per year

Each input matters. Lowballing any of them leads to a rate that looks fine until tax season hits.

Step-by-step

1. 1

   Set your income goal

   Pick the take-home pay you want for the year. A common starting point is your last salaried job + 20-30%.
2. 2

   Add business expenses

   Software, tools, equipment, professional services, insurance, and a small marketing budget.
3. 3

   Add tax reserve

   Self-employed Americans pay self-employment tax on top of income tax. Reserve 25-35% of gross revenue for combined federal/state.
4. 4

   Estimate billable hours per year

   Take your weekly billable hours × weeks worked. Most freelancers bill 20-25 hours/week × 46 working weeks = 920-1,150 hours/year.
5. 5

   Divide and round up

   Round up to clean numbers. $94/hour reads better as $95 or $100.

Worked example

• Income goal: $75,000
• Expenses (software, insurance, equipment): $8,000
• Tax reserve (30% of gross): $35,571
• Total revenue needed: $118,571
• Billable hours: 25/week × 46 weeks = 1,150 hours
• Required rate: $118,571 ÷ 1,150 = $103/hour

Round to $105/hour for clean invoicing.

Reality-check table

Beyond the math

• Industry rates. Check what comparable freelancers in your specialty charge.
• Value pricing. Some clients pay more for outcomes (a launched site, a finished campaign) than for hours.
• Annual raises. Increase your rate every year to keep up with inflation and your growing experience.
• Minimum project fees. Even at $150/hour, a 1-hour project isn't worth the admin overhead.

Common mistakes

• Forgetting to set aside taxes, leading to a surprise bill in April.
• Assuming 40 billable hours per week (impossible long-term).
• Quoting net of taxes (your rate should be before any deductions).
• Not accounting for unpaid client management time.

Building your floor rate

Your floor rate is the lowest rate you can charge and still cover income, taxes, expenses, and time off. Start by listing the income you need to earn, the percentage you'll set aside for self-employment tax (often 25% to 30% in the U.S.), and the percentage of your year that is realistically billable (often 50% to 70% for full-time freelancers). Divide the gross income target by billable hours to find the rate.

Worked example

You want to take home $90,000 after tax. You set aside 28% for taxes, so you need $90,000 / (1 - 0.28) = $125,000 in gross billings. Your business expenses (software, insurance, equipment, accounting) total $12,000. Required gross revenue: $137,000. You expect to bill 22 hours per week for 48 weeks per year, which is 1,056 billable hours. Floor rate: $137,000 / 1,056 = $129.73/hour. Round up to a clean number like $135.

Where freelancers underprice themselves

• Forgetting non-billable hours. Sales calls, scoping, admin, and bookkeeping are not billable but still cost time.
• Skipping time off. Vacation, sick days, and slow weeks reduce billable hours below 52 × full week.
• Treating gross as take-home. Self-employment tax is high. Always model after-tax income.
• Ignoring slow seasons. A 70% utilisation rate during a busy quarter does not mean 70% all year.

Positioning above the floor

The floor rate is what you need. The market rate is what clients will pay. The positioning rate is somewhere above the floor and inside the market range, set based on the value you deliver. Use the Freelance Hourly Rate Calculator to model multiple income targets and tax rates side by side, then choose a positioning rate that supports the lifestyle you want.

Important note

Self-employment taxes, business expenses, and pricing strategies vary by location and situation. Talk to a CPA or financial advisor before relying on these numbers for major decisions.