How to Calculate Your Freelance Hourly Rate (Step-by-Step)
If you're wondering how much you should charge as a freelancer, the answer is never “whatever others are
charging.”
A sustainable freelance rate must be calculated using a clear formula.
Our
freelance hourly rate calculator is built around this exact framework.
The Freelance Rate Formula
Step 1: Define your target annual income.
Step 2: Add annual business expenses (software, hardware, insurance, subscriptions).
Step 3: Add self-employment taxes (typically 20–30%).
Step 4: Divide by realistic billable hours (not 40 hours per week).
Most freelancers only bill 50–65% of their working hours. The rest goes to admin, marketing, client
communication,
and proposal writing. This is why dividing salary by 2,080 hours leads to undercharging.
Example Calculation
Desired income: $100,000
+ Expenses: $15,000
+ Taxes (25%): ~$28,750
= Required revenue: ~$143,750
If you realistically bill 1,200 hours per year:
$143,750 ÷ 1,200 = $119/hour minimum rate.
How to Price a Freelance Project
Once you know your base rate, use the
project pricing calculator
to convert it into flat-fee quotes.
Flat-rate pricing protects you from efficiency penalties. If you complete work faster due to experience,
you earn more per hour instead of less.
Freelance Tax Planning Basics
Freelancers are responsible for self-employment tax, income tax, and quarterly estimated payments.
Always calculate rates using gross revenue targets — not net income assumptions.
Avoiding Scope Creep
Scope creep silently lowers your effective hourly rate.
Use the
scope creep estimator
to see how unpaid revisions reduce profit margins.
Protect yourself with clearly defined deliverables, revision limits, and change-order clauses.