The Freelance Rate Formula
Hourly Rate = (Desired Income + Business Expenses) ÷ Total Billable Hours per Year
Why Billable Hours Are Less Than Total Working Hours
Most freelancers can only bill for a fraction of their total working time — the rest goes to finding clients, invoicing, admin work, and professional development. A common assumption is that only 50-70% of working hours are actually billable, which is why this calculator asks for realistic billable hours directly rather than assuming a standard 40-hour week is entirely billable.
Don't Forget Self-Employment Taxes
As a freelancer, your "take-home income" target should already account for the fact that you'll owe self-employment tax (covering both employer and employee portions of Social Security and Medicare) in addition to regular income tax — factor this into your desired income figure, or use our Self-Employment Tax Calculator to estimate the additional amount needed.
Common Mistake: Underestimating Expenses
New freelancers often forget to account for costs employees don't typically pay themselves — health insurance, retirement contributions, equipment, software subscriptions, and business insurance can add up significantly.