How to Calculate Your Freelance Hourly Rate
Short answer: Add your desired annual pay and annual business expenses, apply a profit margin if you want a buffer, then divide by realistic billable hours for the year (hours per week × weeks you actually bill). Do not divide a salary by 2,080 unless you truly bill every working hour.
The pricing formula (plain language)
- Choose a desired annual salary (take-home goal before you layer taxes separately).
- Add annual business expenses (software, insurance, equipment, contractors).
- Optionally add a profit margin percentage so the business keeps a cushion.
- Estimate billable hours per week and weeks per year after vacation and admin time.
- Divide the annual target by total billable hours.
That is exactly what the Hourly Rate Calculator does in your browser. It is pure pricing math from your inputs — it does not apply IRS tax tables.
Why freelancers undercharge
- Assuming 40 billable hours every week
- Forgetting non-billable sales, proposals, and bookkeeping
- Ignoring expense load that an employer would have covered
FAQ
Does this include self-employment tax?
No. This guide and calculator stay on pricing inputs you provide. Tax set-aside and Schedule SE tools remain gated until licensed CPA/EA review.
Should I quote hourly or project?
Use hourly as a floor, then consider project pricing or value-based pricing when scope is clear.
Related tools
Informational only — not financial advice. Disclaimer.