PiggyFreelance hourly rate: what you should charge
Work backwards from the life you want: target income, real billable hours, expenses and taxes — out comes the rate you should charge.
How this is calculated
The calculation runs backwards from the income you want to keep. Because
business expenses are deductible, tax applies to profit rather than revenue, so the
revenue you need is target ÷ (1 − tax rate) + expenses — not
(target + expenses) ÷ (1 − tax rate), which taxes your expenses a second
time and inflates the rate. That revenue is then divided by realistic billable hours.
Worked example: to keep $70,000 after a 30% set-aside with $5,000 of expenses you need $105,000 of revenue. Billing 25 hours a week for 48 weeks — 1,200 hours — that is $88 an hour.
What this rate has to cover
| Input | This page |
|---|---|
| Desired take-home | $70,000 |
| Tax set-aside | 30% of profit (25–30% is the common US starting range here) |
| Business expenses | $5,000 (software, insurance, health often $6,000–$12,000 if you add it) |
| Billable time | 25 hours/week, 4 weeks off → 1,200 hours — not 2,080 |
| Revenue needed | $105,000 = target ÷ (1 − 0.30) + expenses |
| Floor rate | $88 / hour (then add 10–20% for risk if you want) |
Your targets
Freelance wage vs a salaried hourly rate
Searches like “freelance wage calculator” and “self employed hourly rate” are this tool: take-home target, real billable hours, expenses, then a tax set-aside. They are not salary ÷ 2,080. If you already have a W-2 offer to match, use 1099 vs W-2 instead of this page. If you need the tax percentage that goes in the set-aside field, run self-employment tax and the 1099 tax calculator, then park the combined bill with the quarterly dates.
| This page | 1099 vs W-2 | Salary ÷ 2,080 | |
|---|---|---|---|
| Starting point | Take-home you want to keep | A salary offer on the table | Headline salary only |
| Hours | Billable hours you actually invoice | Billable hours vs 2,080 | Always 2,080 |
| Tax | Your set-aside % (expenses added after gross-up) | Employer FICA priced in; SE-aware after-tax | Usually none |
| Worked figure here | $88/hr to keep $70k | $83/hr to match $95k W-2 | $95k → $45.67/hr |
Why your rate must be higher than a salary ÷ 2080
Employees get paid for 2,080 hours a year; freelancers don't. Real billable time is eaten by marketing, admin, proposals and gaps between clients — most full-time freelancers bill 20–30 hours in a 40-hour week. Add self-employment tax, health insurance, software and unpaid vacation, and a rate that "matches" your old salary quietly pays you 30–40% less. This calculator makes those hidden costs explicit.
Be honest about billable hours
This is the input people get wrong, and it distorts everything downstream. Billable hours are the hours a client actually pays for — not the hours you work. Writing proposals, invoicing, chasing late payments, marketing, bookkeeping, learning new tools and answering enquiries that go nowhere are all real work and none of it appears on an invoice. Freelancers new to the model often assume 40 billable hours a week and discover the real figure is closer to 20 or 25 once the business side is running.
Overestimating here is expensive because the error compounds: too many assumed hours produces too low a rate, and the low rate then requires more hours to hit the same income, leaving even less time for the unpaid work that finds the next client. If you have been freelancing for a few months, look at actual invoiced hours rather than guessing. If you are just starting, 25 hours a week is a safer planning assumption than 40.
Why the expense handling matters
Business expenses are deductible, which means tax applies to profit rather than revenue. The correct calculation adds expenses to the revenue you need after grossing up for tax, not before. Getting this backwards — dividing income plus expenses by one minus the tax rate — taxes your expenses a second time and inflates the recommended rate. It is a subtle error and a common one; we found it in our own first version of this tool, and in a competitor's, which is why the method is spelled out at the top of this page.
What the rate should include
The tax set-aside field should cover federal self-employment tax, federal income tax and any state income tax — 25–30% is a common starting range for US freelancers, though our quarterly tax calculator gives a figure based on your actual profit. Business expenses should include everything the work requires: software, hardware amortised over its life, professional insurance, accounting fees, and the health insurance an employer would otherwise have provided. Health cover alone often runs $6,000–$12,000 a year for an individual and is the single largest line most new freelancers forget.
What the calculator gives you is a floor, not a price. It tells you the rate below which you are effectively taking a pay cut, which is information you need before a negotiation rather than after. Experienced freelancers usually add 10–20% on top to compensate for risk, since contract income stops without notice and carries no unemployment protection.
From hourly to actual pricing
Use the hourly figure internally and quote projects wherever you can. Fixed-price work rewards you for getting faster and better, while hourly billing quietly penalises efficiency — the more skilled you become, the less you earn for the same result. Estimate the hours, apply your floor rate, add a margin for scope creep, and quote a single number.
When raising rates with existing clients, give 30–60 days notice and anchor the increase to market rates or added value rather than to your own costs. Raise in meaningful steps of 10–20% rather than token amounts, and accept that losing your lowest-paying client at a higher rate is usually a net gain in both income and time.
Frequently asked questions
What tax percentage should I set aside?
Should I charge hourly or per project?
How do I raise rates with existing clients?
Sources
Every formula on this page is checked against an independent implementation before publication. How we check our math →