How the rate is worked out
The calculator works backwards. It finds the yearly profit that, after self-employment tax and your income tax set-aside, leaves exactly the take-home pay you asked for. It adds your expenses to get the revenue you need, then divides by your billable hours.
Take-home = profit − self-employment tax − income tax set-aside
Income tax set-aside = rate × (profit − half of SE tax)
Revenue needed = profit + expenses
Billable hours = hours per week × (52 − weeks off)
Hourly rate = revenue ÷ billable hours (rounded up to the cent)
Day rate = hourly rate × (hours per week ÷ days per week)
Self-employment tax uses the 2026 rules from the self-employment tax calculator: 15.3% on 92.35% of profit, with the 12.4% Social Security part capped at the 2026 wage base, plus 0.9% Additional Medicare Tax on high earnings.
Worked example: $60,000 take-home, 25 billable hours a week
With $12,000 of expenses, 6 weeks off and a 15% income tax set-aside, the profit needed is $83,414.24. Self-employment tax on that is $11,786.06 and the income tax set-aside is $11,628.18, which leaves $60,000. Revenue must be $83,414.24 + $12,000 = $95,414.24.
Billable hours are 25 × (52 − 6) = 1,150 a year. $95,414.24 ÷ 1,150 = $82.97 an hour. Over a 5-day week that is 5 billable hours a day, a day rate of $414.85.
Notice how much the hours matter. The same goal at 30 billable hours a week drops the rate by about a sixth, and at 20 hours it rises by a quarter. Getting an honest count of billable hours is the most useful thing you can do before setting a price.
What this does not include
- Retirement savings. Add what you want to save to your take-home target, or to expenses if it is a business plan contribution.
- Unpaid invoices and slow months. Many freelancers add a margin of 10% or more for both.
- Exact income tax. The set-aside is your own estimate; deductions such as the qualified business income deduction and retirement contributions can lower the real figure.
An estimate for planning, not tax advice. Tax figures are for tax year 2026.
Questions people ask
How do I work out my freelance hourly rate?
Start from what you want to keep, add your business expenses and the taxes you will owe on the profit, then divide by the hours you can actually bill in a year. Wanting $60,000 after tax with $12,000 of expenses, 25 billable hours a week and 6 weeks off needs about $82.97 an hour.
Why is my freelance rate so much higher than my old hourly wage?
An employer pays half of your Social Security and Medicare tax, your equipment and software, and pays you for holidays and sick days. As a freelancer you cover all of that yourself, and not every working hour is billable. A rate of 1.5 to 2 times the equivalent wage is common for that reason.
How many billable hours should I assume?
Fewer than you think. Invoicing, sales calls, admin, learning and finding the next client all take time you cannot charge for. Many full-time freelancers bill 20 to 30 hours in a 40-hour week. Start with your real numbers from the last few months if you have them.
What should I enter for income tax?
A rough set-aside rate for federal and state income tax on your profit. The calculator applies it to profit minus the deductible half of self-employment tax. It is a planning number, not a tax calculation: your real rate depends on deductions, credits, other income and where you live.
Does the day rate assume an 8-hour day?
No. It is your hourly rate times your billable hours per working day: billable hours a week divided by working days a week. At 25 billable hours over 5 days, a day rate covers 5 billable hours.