How the rate is worked out

  1. Gross up for tax. The calculator finds the profit that leaves your take-home pay after self-employment tax (15.3% on 92.35% of profit), federal income tax on the 2026 brackets after the standard deduction and the 20% qualified business income deduction, and your state rate.
  2. Add expenses. Revenue has to cover the costs of doing the work before any of it is profit.
  3. Divide by billable hours. Billable hours a week times the weeks you work. This is where most rates go wrong: a 40-hour week is not 40 billable hours.

On the example, $70,000 take-home, $8,000 of expenses and 25 billable hours for 46 weeks: $102,290 of revenue, which is $89 an hour. The tax alone is $24,290, which is why a rate set by dividing the salary you want by 2,080 hours comes up so short.

Two checks before you quote it

The market. If the number is well above what clients pay for your kind of work, the levers are more billable hours, fewer expenses, a higher-value niche or project pricing, not a lower rate that can’t pay the tax bill.

Uneven months. A rate that covers the year still leaves lean months. Setting aside the tax share of every payment as it lands is what keeps a slow quarter from becoming a missed estimated payment.

Questions, answered

How do I calculate my freelance hourly rate?

Start from the income you want to keep after tax. Add the self-employment tax and income tax on that income, then your business expenses, to get the revenue you need. Divide by the hours you can actually bill in a year: billable hours a week times the weeks you work, after holidays, sick days and slow weeks.

How many billable hours does a freelancer have in a year?

Fewer than it seems. Admin, sales, invoicing and unpaid revisions take a large share of a working week, so 20 to 30 billable hours a week is common for a full-time freelancer, and 46 to 48 working weeks once holidays and time off are counted.

Why is a freelance rate so much higher than an hourly wage?

An employee’s wage is only part of what they cost: the employer also pays half of Social Security and Medicare, plus equipment, software, paid time off and unbilled hours. A freelancer pays all of that out of their rate, and pays the full 15.3% self-employment tax.

Does this include taxes?

Yes. It works backwards from your take-home pay through federal self-employment tax and income tax on the 2026 brackets, with the standard deduction and the qualified business income deduction, plus a flat state rate you choose.

Sources

  1. Rev. Proc. 2025-32 (PDF) — IRS. 2026 brackets, standard deduction and qualified business income thresholds.
  2. Self-employment tax — IRS. The 15.3% rate and the 92.35% rule.