How to calculate your freelance rate
Start with what you want to keep, add everything that comes out before you see it, then divide by the hours you can actually bill. Here's the example, using the calculator's default inputs:
| Step | Amount |
|---|---|
| Take-home goal | $70,000 |
| Health insurance | $7,200 |
| Retirement savings | $7,000 |
| Federal income tax | $7,459 |
| Self-employment tax | $15,618 |
| State income tax | $3,259 |
| Business costs | $8,000 |
| Yearly billings needed | $118,537 |
| Billable hours (48 weeks × 40 hours × 65%) | 1,248 |
| Hourly rate | $94.99 |
Dividing $70,000 by 2,080 hours gives $33.65, which is the mistake to avoid. The real rate is 2.8 times that. A full-time schedule isn't 2,080 billable hours once you count weeks off and the time you spend finding work, sending invoices, and keeping records. Track a typical month to get your own billable share, since the 65% here is only an example.
Why you can’t just add 30% for taxes
Self-employment tax and income tax depend on each other, and both depend on your profit, so a flat percentage is only a guess. This calculator solves for the billings that leave exactly your goal. In the example, grossing up the $70,000 goal by a flat 30% suggests $100,000, before any costs or benefits, and that's no way to tell whether 30% is right. The real tax is $26,337, or 23.8% of $110,537 in profit.
- Self-employment tax comes first. It's 15.3% (12.4% Social Security and 2.9% Medicare) on 92.35% of profit. Here, that's $102,081 of net earnings and $15,618 of tax. Social Security stops at $184,500 of combined wages and earnings for 2026, so the rate falls for high earners.
- Half of it comes off your income. About $7,809 is deducted before income tax. It doesn't lower the self-employment tax itself.
- Health and retirement lower income tax only. Your $7,200 of premiums and $7,000 of plan contributions don't reduce self-employment tax. That's why a $1,000 business cost saves more tax than a $1,000 premium.
- QBI lowers income tax again. Many sole proprietors can deduct up to 20% of qualified business income. It's $14,486 here, and without it you'd need to bill $123,740. The deduction shrinks at higher incomes, and the calculator handles that as well.
The result isn't a straight line. At these numbers, the next $1,000 billed leaves $653. Without any tax, you'd need just $92,200, so tax alone accounts for $26,337 of the billings.
Hourly rate calculator for freelance income goals
A $75,000 take-home at 25 billable hours a week takes $105 an hour, using the example costs and tax settings. At 35 hours, it's $75. The table shows how much hours matter.
| Take-home | 15 hrs | 20 hrs | 25 hrs | 30 hrs | 35 hrs |
|---|---|---|---|---|---|
| $40,000 | $106 | $79 | $64 | $53 | $45 |
| $50,000 | $125 | $94 | $75 | $63 | $54 |
| $60,000 | $144 | $108 | $86 | $72 | $62 |
| $75,000 | $175 | $131 | $105 | $88 | $75 |
| $100,000 | $228 | $171 | $137 | $114 | $98 |
| $125,000 | $282 | $212 | $169 | $141 | $121 |
| $150,000 | $330 | $248 | $198 | $165 | $142 |
How to set a day rate or project price
Multiply your hourly rate by the hours each one involves. An 8-hour day at $94.99 is $760. A 40-hour project with a 15% buffer for overruns is $4,370. Compare past estimates with the hours they really took, then set your buffer from that.
These are your floors. They show what you need, not what the market will pay. Check what clients pay for similar work where you are. If your rate comes out above that, the fixes are more billable hours, lower costs, or work where you can charge for the result rather than for time.
What freelance rate matches a salaried job?
A job with $6,000 of employer health coverage and a $3,000 match would need to pay $97,457 to leave the same $70,000, while you'd need to bill $118,537. The comparison gives both the same health and retirement budget, and the employer pays its part.
| The job | Freelancing to match | |
|---|---|---|
| Pay or billings | $90,000 | $111,020 |
| Payroll or self-employment tax | $6,793 | $14,556 |
| Federal and state income tax | $12,918 | $9,175 |
| Cost to the employer, or your rate | $105,885 in total | $88.96 an hour |
Total compensation for that job is $105,885: the salary, $6,885 of the employer's payroll tax, and $9,000 of benefits. That's why the same pay looks different on each side. As an employee, your employer pays half of Social Security and Medicare. Self-employed, you pay both halves. Paid time off is already built in through the salary, and through your weeks off here.
What catches new freelancers out
- No one withholds your tax. The IRS says you generally need to make estimated payments if you're in business for yourself. In the example, that's about $23,078 a year in federal tax, or $5,769 a quarter, and you can owe a penalty for paying too little.
- Slow months and unpaid invoices. Count them as weeks off or in the fees option, since a rate that needs every hour booked won't hold up.
- Health coverage limits. You can't deduct premiums for any month you could join a subsidized plan through an employer, including your spouse's.
- Retirement limits. A SEP-IRA for yourself is limited to about 20% of net earnings after half of self-employment tax. A solo 401(k) can allow more. The calculator warns you if your figure looks too high.
A tax professional can check your numbers, especially if you're thinking about an S corporation, which this tool doesn't model. Our income tax calculator estimates tax at any level of profit, and the guide to federal income tax explains how the brackets work.
Common questions
How much should I set aside for taxes as a freelancer?
It depends on your profit, your filing status, and your state, so no single percentage fits. In the example, total tax is 23.8% of profit, and the calculator shows your own figure. Set aside slightly more until you've seen one full year.
What if I also have a job?
Enter your wages in the advanced options. They use up the Social Security wage base first and push freelance income into higher brackets, so the calculator counts only the extra tax this work adds.
Is the take-home goal before or after retirement savings?
After. The take-home figure is spending money, once taxes, costs, health coverage, and the retirement savings you entered are paid. Enter $0 for retirement if you'd rather count savings as part of your take-home.
Does this work for an LLC?
Only if your business income goes on Schedule C and is subject to self-employment tax, as a sole proprietor's is. It doesn't model partnerships, or S corporation or C corporation taxation, so ask a tax professional if your LLC files that way.
Do I pay self-employment tax on a small side gig?
You owe it once net earnings reach $400 for the year. The income tax on a side gig depends on your other income. In the side gig preset above, the calculator adds it on top of your wages.
Sources
- Self-employment tax (Social Security and Medicare taxes) · Internal Revenue Service
- Schedule SE (Form 1040), Self-Employment Tax · Internal Revenue Service
- Instructions for Form 7206, self-employed health insurance deduction · Internal Revenue Service
- Instructions for Form 8995, qualified business income deduction · Internal Revenue Service
- Estimated taxes · Internal Revenue Service
- Publication 560, Retirement Plans for Small Business · Internal Revenue Service