How do I calculate my freelance hourly rate?

Start from the annual income you want to take home, add the costs an employer would normally cover (self-employment tax, health insurance, retirement, paid time off) plus your business expenses and a profit margin, then divide by your billable hours — not all 2,080 hours in a year, since you can only bill a fraction of your working time.

Why can't I just divide a salary by 2,080 hours?

Because a salaried worker is paid for vacation, holidays, sick days, training, and downtime, while a freelancer only earns when billing a client. Most freelancers bill only about 50–70% of their working hours, and they also self-fund taxes and benefits — so a salary divided by 2,080 dramatically underprices the work.

How many hours can a freelancer actually bill?

Realistically, a full-time freelancer bills around 1,000 to 1,400 hours a year — roughly 50–70% of a 2,080-hour year — once you subtract time spent on marketing, admin, invoicing, proposals, and unpaid gaps between projects. Use your own realistic billable percentage when setting a rate.

Should my freelance rate include taxes?

Yes. Your rate has to cover self-employment tax (15.3%) and income tax, because no client withholds them for you. Build the tax you'll owe into the rate rather than discovering at tax time that your effective pay was far lower than the number you quoted.

What's a good profit margin to build into a freelance rate?

Many freelancers add a margin of roughly 10–30% on top of covering their costs, to fund growth, absorb slow periods, and reward the risk of running a business. It's a business decision, not a fixed rule — the key is that the margin is intentional rather than zero by accident.

What hourly rate should I charge as a freelancer?

The most common way to set a freelance rate — take the salary you want and divide by 2,080 hours — is also the fastest way to underprice yourself into the ground. It ignores taxes, benefits, and the simple fact that you can't bill every hour you work. Here's how to set a rate that actually pays you.

Last reviewed: June 2026

The quick answer

A defensible freelance rate is built, not guessed. Work from the take-home income you want and add back everything an employer used to cover:

Your rate ≈

(target income + self-employment tax + benefits you self-fund + business expenses + profit margin) ÷ billable hours

The two pieces people get wrong are the denominator (you bill far fewer hours than you work) and the taxes and benefits (a salary quietly included them). Fix both and your rate jumps — correctly.

Why "salary ÷ 2,080" is a trap

A $100,000 salaried employee isn't paid $48/hour for 2,080 hours of pure output. They're paid for vacation, holidays, sick days, training, meetings, and downtime — and their employer adds payroll taxes, health insurance, and a retirement match on top. Copy that $48 as your freelance rate and you've signed up to do the same work for a fraction of the real value.

Two corrections matter most:

You can't bill every hour. Marketing, proposals, invoicing, admin, and gaps between clients are unpaid. Most full-time freelancers bill only 50–70% of their hours — roughly 1,000–1,400 billable hours a year, not 2,080.
You fund your own everything. Self-employment tax (15.3%), income tax, health insurance, retirement, and time off all come out of your rate. See self-employment tax explained for the tax piece.

Build your rate in five steps

Set a target take-home income. What you actually want to keep after taxes — the number that pays your life.
Add taxes. Gross up for self-employment tax and income tax, since the rate has to deliver your target after the IRS.
Add the benefits you replace. Health insurance premiums, retirement contributions, and the value of paid time off you no longer get.
Add business expenses and a margin. Software, equipment, insurance, and a profit margin (often 10–30%) to fund growth and absorb slow months.
Divide by realistic billable hours — your honest billable percentage of a working year, not 2,080.

Quick illustration

Want $80,000 in take-home pay? After grossing up for taxes and adding ~$15,000 of self-funded health, retirement, and overhead, you might need to collect well over $120,000. Spread that across ~1,200 billable hours and your rate lands around $100/hour — not the $38 that "$80k ÷ 2,080" would suggest.

A shortcut: price against a salary

If you're weighing freelancing against a specific salaried role, you don't have to build the rate from scratch — you can find the contract rate that leaves you just as well off after taxes and benefits. That "make you whole" number is exactly what our 1099 vs W-2 calculator solves for. Read 1099 vs W-2: which is actually better? for the full comparison.

Find the rate that matches the income you want

Our free 1099 vs W-2 calculator works out the contract rate that truly matches a target salary — after self-employment tax, the QBI deduction, and the health, retirement, and time-off costs you'd cover yourself. A fast way to sanity-check any rate you're considering. Nothing leaves your browser.

Find my equivalent rate →

Frequently asked questions

How do I calculate my freelance hourly rate?: Start from your target take-home income, add self-employment tax, the benefits you self-fund, business expenses, and a profit margin, then divide by your realistic billable hours — not all 2,080 in a year.
Why can't I just divide a salary by 2,080?: A salary pays for time off and quietly includes employer taxes and benefits, and you can't bill every hour you work — so that math badly underprices freelance work.
How many hours can a freelancer actually bill?: Usually about 1,000–1,400 a year (roughly 50–70% of 2,080) after marketing, admin, and gaps between projects.
Should my rate include taxes?: Yes — it has to cover the 15.3% self-employment tax and income tax, since no client withholds them for you.
What profit margin should I build in?: Often 10–30% on top of covering costs, to fund growth and absorb slow periods. The point is to make the margin intentional, not accidentally zero.