How to Calculate Your Freelance Hourly Rate

The biggest mistake freelancers make is taking their desired annual salary and dividing it by 2,080 (the standard 40-hour work year). This leaves them broke at tax time.

What is the formula for a freelance hourly rate?

The freelance hourly rate formula is:

Hourly Rate = (Desired Net Income + Business Expenses) / (1 - Tax Rate) / Total Billable Hours

Why you must account for unbillable hours

As a freelancer, you are a business owner. You spend time on marketing, admin, emailing, and accounting—none of which pays the bills. If you work 40 hours a week, you likely only bill 20–25 hours. If you divide your income by 40, your rate will be half of what it needs to be.

What is a good freelance hourly rate?

A good freelance hourly rate covers:

1. Your target take-home pay (net income).
2. Your estimated self-employment and income taxes (usually 25-30%).
3. Software, hardware, and internet expenses.
4. Retirement contributions and health insurance.

For most mid-level freelancers in the US, this translates to $50–$100+ per hour.

Don't do mental math on your rates. Use our Freelance Rate Calculator to find the absolute minimum rate you should charge.