How This Calculator Works
This tool calculates the hourly rate you need to charge as a freelancer, accounting for taxes, business expenses, non-billable time, and time off. It does not simply divide your income goal by 2,000 hours — that method is dangerously inaccurate.
The Formula
Step 1: Billable Hours = Hours per Week × Weeks per Year × Billable Ratio
Step 2: Required Revenue = Target Income + Expenses + Self-Employment Tax
Step 3: Minimum Rate = Required Revenue ÷ Billable Hours
Step 4: Recommended Rate = Minimum Rate × 1.20
Why Billable Hours Matter
Most freelancers work far more hours than they can bill. Research shows that only about 40% of a freelancer's total working hours are billable. The rest is spent on sales, admin, email, and unpaid work. If you ignore this, you will systematically undercharge.
Self-Employment Tax
US-based freelancers pay a 15.3% self-employment tax (12.4% Social Security + 2.9% Medicare) on 92.35% of net earnings. The Social Security portion is capped at the first $184,500 of earnings for 2026. This calculator includes an estimate of your SE tax in the required revenue.
Frequently Asked Questions
What is a realistic billable ratio? For most freelancers, 40–60% is realistic. If you spend a lot of time on sales or admin, use a lower number.
Does this include state taxes? No. This calculator provides a federal-level estimate. State taxes vary significantly and should be factored in separately.
Can I use this for consulting? Yes. The formula works for any independent professional who bills by the hour.