How this freelance rate calculator works
Start with the take-home income you want, then add your annual business expenses and the total tax rate you expect to pay on profit.
The calculator grosses your income up for tax, adds expenses and an optional profit buffer to find the revenue your business must bring in each year.
It then works out your realistic billable hours: weekdays in a year minus your days off, times your daily hours, times the share of time you can actually invoice.
Revenue divided by billable hours gives your minimum hourly rate. We multiply it into a day rate and a project price, and compare it with the hourly pay of an employee earning the same pre-tax salary.
The freelance rate formula
A sustainable rate covers your pay, taxes, costs and unbilled time:
Hourly rate = ((income ÷ (1 − tax rate)) + expenses) × (1 + buffer) ÷ billable hours
- Billable hours = (260 − days off) × (weekly hours ÷ 5) × billable share
- Day rate = hourly rate × daily hours
- Project rate = hourly rate × project hours
- Employee hourly = (income ÷ (1 − tax rate)) ÷ 2,080
Worked example
Leo wants to take home $90,000 a year, expects $12,000 of business costs and plans for a 30% total tax rate. He works 40 hours a week, bills 65% of them and takes 25 days off, with a 10% buffer.
Grossed up for tax, $90,000 becomes $128,571. Adding expenses and the buffer, his business needs about $154,629 in revenue.
He has 235 working days × 8 hours = 1,880 hours, of which 65% — 1,222 hours — are billable. His minimum rate is $154,629 ÷ 1,222 ≈ $126.54 an hour, or about $1,012 per 8-hour day and $5,061 for a 40-hour project.
An employee earning the same $128,571 salary makes about $61.81 an hour, so Leo's rate is roughly 2.05 times that — a normal gap once unpaid time and expenses are counted.
Why your old salary divided by 2,080 is the wrong rate
The most common pricing mistake new freelancers make is taking their previous salary and dividing by 2,080 hours. That number assumes you are paid for every hour of a 40-hour week, 52 weeks a year, including vacations and holidays — and that someone else covers your equipment, software, retirement match and half of your payroll taxes.
As a freelancer you are paid only for the hours you invoice. Proposals, bookkeeping, marketing and learning are real work, but nobody pays for them directly, so your billable hours must carry the whole business.
Estimating billable hours honestly
Experienced freelancers typically bill 50% to 75% of their working time. Early on, when you are still building a client base, 50% is a safer assumption; established consultants with retainers may reach 80%.
Count your days off generously. Vacation, public holidays and the occasional sick day easily add up to 25 or 30 days. Planning for them up front means a week away doesn't wreck your income.
Taxes and expenses you must price in
In the US, self-employed people pay 15.3% self-employment tax on most of their profit on top of federal and state income tax, so a combined 25% to 35% is a realistic planning range for moderate incomes. Our self-employment tax calculator can give you a more precise figure for your situation.
Business expenses include the obvious — a laptop, software subscriptions and a website — and the easily forgotten: health insurance, liability insurance, an accountant, professional memberships, coworking space and retirement contributions you would otherwise get through an employer.
Hourly, day or project pricing
An hourly rate is your internal floor, not necessarily what you quote. Day rates suit on-site or embedded work and reduce haggling over minutes. Project pricing rewards efficiency: if you finish faster than estimated, you keep the difference.
When quoting projects, estimate hours, multiply by your rate and add 15% to 25% for revisions and scope creep. Value-based pricing — charging relative to the outcome for the client — can push well above your floor once you can show results.
Comparing with an employee salary
The comparison above shows the salary that would leave you with the same take-home income at the same tax rate. Freelance rates of 1.5 to 3 times the equivalent employee hourly wage are normal, because the rate has to fund unbilled time, expenses and benefits.
Employees in the US also receive value that never appears on a paycheck — employer payroll taxes, health coverage, retirement matches and paid leave — often worth 20% to 40% of salary. If a job offer looks close to your freelance numbers, include those benefits before deciding.
When and how to raise your rate
Review your rate at least once a year. If you are fully booked for months, have a waiting list or win nearly every proposal, your price is probably too low. Raise it for new clients first, then give existing clients 30 to 60 days' notice.
Keep a cash buffer of three to six months of expenses so you can turn down underpriced work. The profit buffer in this calculator is a simple way to build that cushion into every invoice.
Frequently asked questions
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Not financial advice. ClearCalc provides estimates for educational purposes only. Results depend on the assumptions you enter and may differ from offers from lenders or institutions. Consult a qualified professional before making financial decisions.