Finance
Freelance Hourly Rate Calculator
Calculate the hourly rate you must charge to cover target salaries, business expenses, and taxes.
Inputs
Results
Minimum Target Hourly Rate
$0.00
Gross Income Target
$0.00
Total Annual Billable Hours
0 hrs
Estimated Annual Tax Amount
$0.00
How It Works
The freelance rate calculator works backwards from a desired net income. It accounts for personal tax brackets and business expenses (software, health insurance, office rental) to determine the raw gross revenues you must bill. It then divides this gross revenue target by your annual billable hours (total weeks minus vacation/sick time, multiplied by weekly billable hours) to find the minimum hourly rate you should quote to clients.
Formula Used
Required Gross Revenue = Desired Net Income + Taxes + Business Expenses
To earn a specific net income, a freelancer must bill enough to cover business expenses and personal income taxes. This sets the target revenue that must be generated.
Hourly Rate = Required Gross Revenue / Billable Hours
This divides the gross revenue goal by the actual billable hours in a year (excluding vacations and administrative time). It yields the minimum hourly rate needed to meet the financial target.
Worked Example
Here is a step-by-step example of how these values are calculated:
Desired Net
$80,000
Business Expenses
$10,000
Time Off
4 weeks
Billable Hours
30 hrs/week
Tax Rate
25%
Result: Target Hourly Rate: $80.95. Required Gross Revenue: $116,666.67. Total Billable Hours: 1,440 hours. Estimated Taxes: $26,666.67.
Frequently Asked Questions
What counts as business expenses for a freelancer?
Common overhead expenses include software licenses, web hosting, marketing, professional insurance, legal and accounting fees, hardware depreciation, health insurance, and self-employment taxes.
Why is billable hours per week lower than working hours?
As a freelancer, you spend significant time on non-billable administrative work such as client pitches, invoicing, bookkeeping, and marketing. If you work 40 hours a week, typically only 20-30 hours are billable to clients.