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Freelance Rate Calculator
Thinking about going freelance but have no idea what to charge? Your old salary ÷ 2,080 hours is NOT your freelance rate. Let's factor in taxes, health insurance, unbillable hours, and the fact that you're not actually working 40 billable hours a week.
Your Target Income
Business Expenses
Your Freelance Rates
💡 Rate Breakdown:
You need $0 annual revenue
Working 0 billable hours/year
Equals $0/hour minimum to hit your goals
How to Price Your Freelance Services
Most new freelancers make the same mistake: they take their old W-2 salary, divide by 2,080 hours, and charge that. Wrong. You just gave yourself a 50% pay cut once you factor in taxes, expenses, and unbillable time. Here's how to actually calculate a rate that pays the bills.
💡 Real Talk from Alex Chen, Freelance Dev (8 Years)
My first year: disaster. I made $75k as a W-2 developer ($36/hour). Went freelance, charged $50/hour thinking I was winning. Reality check: paid $11k in self-employment tax (didn't budget for it), $9k health insurance, $3k in software/equipment. Worked my ass off, took home $52k after expenses. LESS than my old job. Year 2: recalculated, charged $95/hour. Same workload, took home $90k. The math MATTERS.
The Real Freelance Rate Formula
(Desired Salary + Business Expenses + Self-Employment Tax) ÷ Billable Hours = Hourly Rate
Example Calculation:
- Desired take-home: $80,000
- Business expenses: $15,000 (health insurance, software, equipment)
- Self-employment tax: $14,535 (15.3% of $95k profit)
- Total needed: $109,535
- Billable hours: 20/week × 48 weeks = 960 hours
- Hourly rate: $109,535 ÷ 960 = $114/hour
That's 3x the $36/hour you made as a W-2 employee. And it's the MINIMUM to match your old lifestyle.
⚠️ Common Mistake: "I Work 40 Hours a Week, So 2,080 Billable Hours/Year"
LOL no. Billable hours = time you can invoice clients. Your 40-hour week includes: client calls (billable), actual work (billable), prospecting/sales (NOT billable), invoicing/bookkeeping (NOT billable), learning new skills (NOT billable), emails/Slack (mostly NOT billable), coffee breaks (NOT billable). Realistic billable percentage: 50-60%. That's 20-24 hours/week. New freelancers? 40-50% (more time prospecting). Anyone claiming 80%+ is lying or has zero work-life balance.
The Unbillable Hours Reality Check
Where your 40-hour week actually goes:
- Client work (BILLABLE): 20-24 hours (this is what you invoice)
- Business development: 5-10 hours (prospecting, proposals, networking)
- Admin/operations: 3-5 hours (invoicing, bookkeeping, emails)
- Learning/skill-building: 2-4 hours (staying current, courses, tutorials)
- Breaks/life: 5-8 hours (lunch, coffee, mental health walks)
Total billable: 20-24 hours out of 40 = 50-60% utilization
This is NORMAL. If you're at 70%+ utilization, you're either: 1) Not investing in marketing (future pipeline is dead), 2) Burning out, or 3) Not learning new skills (you'll be obsolete in 3 years).
Self-Employment Tax: The Hidden Killer
W-2 employees pay 7.65% FICA (Social Security + Medicare). Employer pays the other 7.65%. Freelancers pay BOTH halves: 15.3% self-employment tax on profit.
Example:
- Revenue: $120k
- Business expenses: -$15k
- Profit: $105k
- Self-employment tax: $105k × 15.3% = $16,065
Plus federal income tax (10-37% depending on bracket) and state tax (0-13%). Total tax burden: 30-50% of profit is realistic.
How to plan: Set aside 30-35% of every payment for taxes. Seriously. Open a separate savings account, transfer 35% immediately when paid. April won't destroy you.
💡 Alex's Pricing Tiers Strategy
I don't charge one rate. I have 3 tiers: Standard ($120/hr): New clients, scope unclear, PITA factor unknown. Preferred ($95/hr): Long-term clients, low-maintenance, pay on time. Retainer ($85/hr): 20+ hours/month committed, I prioritize their work, steady income for me. This averages out to $105/hr effective rate while keeping my best clients happy and filtering out one-off projects that waste time.
Business Expenses You MUST Budget For
Annual costs most freelancers forget:
- Health insurance: $6k-12k/year (no employer plan anymore)
- Retirement: $6k-20k/year (no 401k match—save it yourself or be broke at 65)
- Paid time off: $0 (4 weeks vacation = $8k-12k in lost billable income)
- Software/tools: $1k-5k/year (Adobe $600, Slack $96, hosting $200, etc.)
- Equipment: $1k-3k/year (laptop every 3-4 years = $2k, monitors, phone)
- Home office: $1k-3k/year (10-15% of rent is deductible, but still a cost)
- Professional development: $500-3k/year (courses, conferences, books)
- Accounting/legal: $1k-3k/year (CPA for taxes, lawyer for contracts)
- Marketing: $1k-5k/year (website, ads, portfolio, networking events)
Total: $18k-50k/year depending on your field and lifestyle.
Freelance vs W-2: The Real Comparison
$80k/year W-2 job = what freelance rate?
- W-2 take-home after taxes: ~$60k
- Employer pays: $6k FICA match, $8k health insurance, $3k 401k match
- You get: 15 days PTO ($4.6k value), sick days, stable paycheck
- Total compensation: ~$90k
To match this freelancing:
- Need $90k after-tax + $15k business expenses = $105k revenue
- Self-employment tax on $105k profit: $16k
- Total revenue needed: $121k
- At 1,000 billable hours/year: $121/hour minimum
So your $38/hour W-2 rate → $121/hour freelance rate. That's the real math.
Market Rate Reality Check
Typical freelance rates by field (US, 2025):
- Web developers: $75-150/hour
- Graphic designers: $60-120/hour
- Copywriters: $50-100/hour
- Consultants (business/strategy): $100-300/hour
- Video editors: $50-100/hour
- Social media managers: $40-80/hour
Geographic variance: SF/NYC = high end, Midwest/South = low end. Remote work is equalizing this (you can charge NYC rates from Kansas now).
Negotiation Script: When They Say You're Too Expensive
Client: "Your rate is too high. [Cheaper freelancer] charges $40/hour."
You: "I understand budget is a concern. A few things to consider: my rate reflects 8 years of experience specifically in [your niche]. I deliver projects on time and on budget—my average client saves 20-30% on total project cost because there's no scope creep or revisions. The $40/hour freelancer might end up costing more if the project takes 2x as long or needs extensive revisions. I'm happy to discuss a fixed-price project if that works better for your budget, but my hourly rate reflects the value I bring."
Translation: "You get what you pay for, and I'm worth it." But said nicely.
Reviewed by Alex Chen
Freelance Developer (8 Years, $200k+ Annual Revenue)
Alex went from underpaid first-year freelancer to multiple-six-figure independent consultant. His advice? Charge 2-3x your old W-2 hourly rate minimum, or you're losing money.
Frequently Asked Questions
How do I calculate my freelance hourly rate?
Formula: (Desired Annual Salary + Business Expenses + Taxes) ÷ Billable Hours. Key: you DON'T work 2,080 hours/year billable. Realistic: 1,200-1,500 billable hours (50-60% utilization). Example: $80k salary + $15k expenses + $20k taxes = $115k needed. 1,200 billable hours → $96/hour minimum. Don't forget: salary covers vacation, sick days, admin time, marketing—all unbillable.
What's a realistic billable hour percentage?
50-60% for most freelancers. That's 20-24 billable hours per 40-hour week. Rest is: prospecting (5-10 hrs), admin/invoicing (3-5 hrs), learning/training (2-4 hrs), breaks/life (5-8 hrs). New freelancers: 40-50% (more marketing needed). Established: 60-70% (referral-based). Anyone claiming 80%+ is either lying or burning out.
Should I charge more than my old salary?
YES. At minimum 1.5-2x your old hourly W-2 rate. Why? You now pay: full 15.3% self-employment tax (employer paid half before), health insurance ($400-800/month), no paid vacation (20 days = $6k-10k/year), retirement (no 401k match), equipment/software ($2k-5k/year), unbillable admin time (10-20 hrs/week). A $80k/year employee costs employer ~$100k. You need to charge for ALL of that.
What expenses should I include in my rate?
Annual costs: Health insurance ($6k-10k), Self-employment tax (15.3% of profit), Software/tools ($1k-3k—Adobe, Figma, hosting), Equipment ($500-2k/year average—laptop replacement, monitors, phone), Home office (10-15% of rent/mortgage), Marketing ($1k-5k—website, ads, networking), Professional development ($500-2k—courses, conferences), Accounting/legal ($1k-3k). Total typical: $15k-30k/year depending on field.