One of the hardest parts of going independent is answering the question every new freelancer dreads: "What should I charge?" Price too low and you work sixty-hour weeks just to cover rent. Price too high and you lose the client before the call ends. This freelance rate calculator removes the guesswork by starting from the salary you actually want, then working backward to the hourly and day rate that makes it possible.
Instead of copying a competitor's rate from a forum thread, the build-up method starts with your target take-home pay, adds the taxes and business costs you would otherwise forget, and divides everything by the number of hours you can realistically bill in a year. The result is a floor rate — the minimum you must charge to hit your income goal — not a guess.
How to Use
- Enter your Desired Annual Income — the after-tax salary you want to take home each year. If you were earning $80,000 as an employee, type that.
- Set Billable Hours / Week to the hours you can genuinely spend on client work. Do not assume forty; most freelancers bill far less because calls, revisions and outreach eat the day.
- Set Vacation / Weeks Off. Freelancers do not get paid sick leave, so the hours you are not working must be spread across the weeks you are.
- Add Annual Business Expenses — software subscriptions, professional insurance, a new laptop, your internet bill, and any other deductible cost.
- Enter your Self-Employment Tax Rate. In the US this combines income tax with the extra self-employment (Social Security and Medicare) tax; a common planning number is 25–35%.
- Adjust Non-Billable Time for the share of your week spent on admin, invoicing, pitching and marketing. The default 20% is realistic for most solo practitioners.
The result card shows your working weeks, total billable hours for the year, the pre-tax profit you need, the full annual revenue you must bring in, and the recommended hourly and day rates.
The Freelance Rate Formula
Most freelancers make the same mistake: they take a desired salary and divide it by fifty-two weeks times forty hours. That ignores four costs that quietly crush the budget — taxes, vacation, expenses, and the hours you cannot bill. The build-up method accounts for all four:
Hourly Rate = (Desired Income ÷ (1 − Tax Rate) + Annual Expenses) ÷ Billable Hours per Year
Where:
- Billable Hours per Year = Billable Hours per Week × (52 − Weeks Off) × (1 − Non-Billable Time %).
- Dividing desired income by
(1 − tax rate)grosses it up so that, after the taxman takes his share, you are left with exactly your target salary. - Expenses are added on top because they come out of revenue before profit is taxed.
Worked example: you want $80,000 take-home, bill 36 hours a week, take 4 weeks off, spend $6,000 a year on tools, pay 25% tax, and lose 20% of your time to non-billable work. You work 48 weeks, for 1,728 gross hours, of which 1,382.4 are billable. Pre-tax profit needed is $80,000 ÷ 0.75 = $106,667. Adding expenses gives $112,667 of required revenue. Divided by 1,382.4 billable hours, you must charge about $81.50 per hour, or roughly $652 per eight-hour day.
Notice how far that is from the naive $38 an hour you would get by dividing $80,000 by 2,080 working hours. The gap is the whole point of this calculator.
Why Your "Real" Billable Hours Are So Low
When you were an employee, eight hours at your desk meant eight productive hours. As a freelancer, a typical eight-hour day breaks down like this: client meetings and quick questions (one hour), email and invoicing (half an hour), pitching new work and posting on social media (one hour), and unavoidable revisions (half an hour). That leaves about five hours of truly billable work — which is why the default billable figure is 36, not 40.
This is also why non-billable time matters so much. If you assume you can bill every working hour, your rate comes out about 20% too low, and you will discover the shortfall only after you have promised clients a full schedule. Being conservative here protects your income.
Examples
Example 1 — The default target. A designer wants $80,000 take-home, bills 36 hours a week, takes 4 weeks off, spends $6,000 a year on tools, and faces a 25% tax rate. The calculator returns about $81.50/hour and $652/day, requiring roughly $112,700 of billings in the year.
Example 2 — The six-figure consultant. An independent consultant targets $150,000, bills 40 hours a week, takes only 2 weeks off, has $20,000 in travel and software costs, and pays 35% tax. Grossing up the salary to pre-tax profit and adding expenses pushes required revenue near $250,000; with about 1,900 billable hours, the rate lands around $130 per hour, or over $1,000 a day.
Example 3 — The high-income specialist. A senior engineer contracting at a $1,500,000 target, billing 40 hours a week, taking 4 weeks off, spending $20,000 on equipment, and paying 35% tax, needs roughly $2.33 million of revenue. Across about 1,632 billable hours that is a rate near $1,426/hour — which sounds extreme until you remember elite contract specialists routinely charge four-figure daily rates.
FAQ
How much should I charge per hour as a freelancer?
Start with your desired annual take-home salary, gross it up for self-employment tax, add your yearly business expenses, and divide by the number of hours you can actually bill in a year. For a $80,000 target with typical taxes, expenses and vacation, that works out to roughly $80–$90 per hour in many fields.
How do I convert a salary to a freelance hourly rate?
Take your target after-tax salary and divide it by (1 − your tax rate) to get the pre-tax profit you need. Add annual expenses, then divide by your realistic annual billable hours. This build-up method is more accurate than dividing salary by 2,080 hours because it accounts for taxes, vacation and time you cannot bill.
What is a good day rate for a contractor?
A day rate is usually your hourly rate multiplied by eight billable hours. If your calculated hourly rate is $80, your floor day rate is about $640. Under long-term contracts, clients expect a slight discount from the hourly-equivalent, but never go below the floor this calculator gives you.
Why do I need to gross up my salary for taxes?
Employees have taxes withheld automatically, but freelancers receive the full invoice amount before any tax is paid. To end up with your target salary after tax, you must earn more than that salary now. Dividing by (1 − tax rate) tells you exactly how much more. At a 25% tax rate, an $80,000 target requires about $106,700 of pre-tax profit.
How many billable hours should I count per week?
Be conservative. Even full-time freelancers rarely bill more than 30–37 hours in a forty-hour week because meetings, email, pitching and revisions are non-billable. The default 36 hours already bakes in a 20% non-billable adjustment; if you spend more time on business development, lower it further.
Should business expenses be included in my rate?
Yes. Every dollar you spend on software, insurance or equipment is a dollar you cannot take home. Adding annual expenses to the profit you need before dividing by billable hours ensures those costs are recovered across every hour you charge.
Disclaimer
This freelance rate calculator is provided for informational purposes only and does not constitute financial, tax, or legal advice. Results are estimates based on the inputs you enter; actual tax rates, deductible expenses and billable hours vary by location, business structure and industry. Self-employment tax figures are planning assumptions, not advice. Always confirm your specific tax situation and pricing with a qualified accountant or business advisor before setting your rates.