Rates & Pricing
How to Calculate Your Freelance Hourly Rate (the Right Way)
Five steps, one real number — not a guess based on what feels reasonable.
Why most freelancers undercharge
Most freelancers set their rate by guessing — copying what a friend charges, matching a number a client accepted once, or picking something that "feels" reasonable. None of that accounts for your actual expenses, your taxes, or the fact that you can't bill every hour you work. The result is a rate that feels fine in the moment but doesn't add up by the end of the month.
Step 1: Calculate your desired annual income
Start with what you actually want to take home — not what sounds impressive, what you need and want to live on. This is your target net income, before taxes and business costs are added back in.
Step 2: Add business expenses
Software, equipment, a portion of your internet bill, coworking if you use it — these are real costs of doing business, and they need to come out of your rate, not your take-home pay. A savings buffer (for slow months, retirement, or emergencies) belongs here too, even though it's easy to skip.
Step 3: Account for taxes (self-employment + federal)
This is the step almost everyone underestimates. Self-employment tax is 15.3% of your net earnings — 12.4% for Social Security (capped at $184,500 in 2026) plus 2.9% for Medicare with no cap. On top of that, federal income tax applies using the standard 2026 brackets (10% to 37%), though the 20% QBI deduction reduces your taxable income for most sole proprietors before that tax gets calculated.
State income tax is not included in this step. It varies from 0% (in states like Texas or Florida) to over 13% (California), so you'll need to add your own state's rate separately if it applies to you.
Step 4: Determine realistic billable hours
Not every hour you work is an hour you bill. Between finding clients, sending proposals, admin, and invoicing, most freelancers realistically bill around 60% of their available hours. If you work 40 hours a week, that's closer to 96 billable hours a month, not 173.
Step 5: Divide and round
Take everything from steps 1-3, divide by your billable hours from step 4, and round to a clean number. That's your minimum viable rate — the floor, not the target.
Run this calculation with your real numbers
The calculator already includes self-employment tax, federal tax, and the QBI deduction.
Go to the free calculatorExample calculation
Say you want $6,000 a month net, with $300 in monthly expenses and a 10% savings buffer (about $630). That's a need of $6,930 a month before tax. After self-employment tax and federal tax, you'd need to bill closer to $8,870 a month. Divided by 96 billable hours, your minimum rate lands around $92 an hour — a very different number than "whatever felt reasonable."