Freelance Hourly Rate Calculator — What to Charge Per Hour (2026)
To take home $85,000 as a freelancer you need to charge about $133.29 an hour. That is $153,278 of billings across 1,150 billable hours — 25 hours a week for 46 weeks — once self-employment tax, income tax, business expenses, health insurance, and retirement are paid out of it. Dividing your target by 2,080 hours gives $40.87, which is short by $92.42 an hour. The same take-home as an employee would need a salary of about $136,276.
| Revenue you need to bill | $153,278.00 |
|---|---|
| Business expenses | −$6,000.00 |
| Health insurance | −$9,000.00 |
| Retirement contributions | −$6,000.00 |
| Self-employment tax | −$20,809.72 |
| Federal income tax | −$17,983.55 |
| California income tax | −$8,484.18 |
| Hourly rate | $133.29 |
| Day rate (8h) | $1066.32 |
| Weekly rate | $3332.25 |
| Billable hours per year25 billable hours x 46 working weeks. | 1150 |
| Your hourly rate | $85,000.55 |
Dividing $85,000 by the usual 2,080 hours gives $40.87/hour. That figure is short by $92.42 because it counts hours you cannot bill and ignores self-employment tax entirely.
How the rate is worked out
Backwards, from the money you want to keep to the number you put on a proposal. Every step adds something a salary quietly absorbed on your behalf.
The first line is a solve rather than a sum because tax is progressive: you cannot add a percentage to your target, since the tax is owed on the larger grossed-up figure, which pushes part of the income into a higher bracket, which raises the tax again. The calculator bisects until the money left after tax lands exactly on your target.
The 2,080-hour mistake
The standard advice is to divide your target salary by 2,080 — 52 weeks of 40 hours. That number describes a salaried employee's year, and it is wrong for a freelancer in three separate ways at once: it counts hours nobody will pay you for, it assumes you never stop working, and it ignores self-employment tax completely.
| Method | Hours used | Rate |
|---|---|---|
| Target ÷ 2,080 | 2,080 | $40.87 |
| Solved properly | 1,150 billable | $133.29 |
A gap of $92.42 an hour — the naive figure is 3.3× too low. Charge $40.87 and bill every one of your 1,150 hours and you finish the year with roughly $47,001 of billings against the $153,278 you needed.
What salary this rate is actually worth
This is the comparison that decides whether freelancing is working, and it is the one rate calculators skip, because answering it needs a payroll model as well as a self-employment one. Both figures below are solved by running the same target take-home through this site's paycheck engine:
| To take home $85,000 | You need |
|---|---|
| Freelance — billings at $133.29/hr | $153,278 |
| Salaried, you buy your own health cover | $136,276 |
| Salaried, employer carries the premium | $127,276 |
You have to bill $26,002 more than the salary of an equivalent job with benefits to end up in the same place. That gap is not markup and it is not profit — it is the employer's half of payroll tax, your expenses, your benefits, and your unpaid weeks, all of which someone else was paying before.
The health insurance asymmetry
Inside that gap is a detail worth isolating, because it is genuinely obscure and it costs real money every year. The self-employed health insurance deduction is an above-the-line income tax deduction. It does not reduce net earnings from self-employment, so it does not reduce self-employment tax. An employee's premium under a Section 125 plan is excluded from income tax and from FICA.
So two people buying the identical policy pay different amounts for it purely because of how their income is characterised. It is not an oversight you can plan around with better bookkeeping — it is how the deduction is written. Above a certain income an entity election changes the calculation, but that is an accountant's conversation and it carries costs of its own.
A worked example
$85,000 take-home, 25 billable hours a week, 6 weeks off, California
| Line | Working | Amount |
|---|---|---|
| Revenue you must bill | solved | $153,278 |
| Business expenses | your cost | −$6,000 |
| Self-employment tax | 15.3% × 92.35% of net earnings | −$20,809.72 |
| Federal income tax | single brackets | −$17,983.55 |
| California income tax | state brackets | −$8,484.18 |
| Health insurance | you buy it | −$9,000 |
| Retirement | nobody matches it | −$6,000 |
| Take-home | your target | $85,000 |
| Rate required | ÷ 1,150 billable hours | $133.29/hr |
Read the tax lines together rather than separately: $47,277.45 of tax on $153,278 of billings. Self-employment tax alone is $20,809.72, and roughly half of that is the employer's contribution that a payroll department used to pay without it ever appearing on your payslip.
Who this is for
Anyone setting a rate for the first time, and anyone who has been freelancing for a year and cannot work out where the money went. It is most useful run twice: once with the billable hours you hope for, once with the hours you actually invoiced last quarter. The distance between those two rates is the single largest source of freelance income shortfall, and it is invisible until you put both numbers side by side.
What this does not account for
- Late and unpaid invoices. The calculation assumes you collect everything you bill. Build a buffer if your clients are slow, and remember that chasing payment is unbillable time.
- Irregular income across the year, which can push you into higher brackets in a strong year and waste deductions in a weak one.
- Entity structure. Everything here models a sole proprietor filing Schedule C. An S-corp election changes the self-employment tax calculation materially, and carries payroll and filing costs that only make sense above a certain profit.
- Federal tax credits. The child tax credit and other federal credits are not modelled — the dependents field feeds state exemptions only, so a filer with dependents will owe less federally than shown.
- Payment processing fees, if clients pay by card or PayPal. See the PayPal fee calculator.
- Quarterly estimated payments. This gives an annual figure; the money is due four times a year. See the self-employment tax calculator.
- 5 states are modelled (California, Florida, Illinois, New York, Texas). Others run federal tax only, so the rate will be understated where state income tax applies.
Sources and dates
Tax parameters come from the IRS and state revenue departments for tax year 2026, listed below with the date each was checked. The rate, the salary equivalences, and the self-employment tax on health premiums are all computed by the engines on this site from those published figures — not quoted from anywhere. If a number here disagrees with your accountant, trust your accountant and let us know.
Questions people actually ask about this
How do I calculate my freelance hourly rate?
Work backwards, in this order: start from the take-home you want, add the tax you will owe on it, add your business expenses, add the benefits nobody is providing — then divide by the hours you can actually bill, not the hours you work. On the figures above that chain runs $85,000 take-home → $153,278 of billings → ÷ 1,150 billable hours → $133.29/hour.
The order matters. Dividing first and adding tax afterwards understates the rate, because the tax is owed on the larger grossed-up figure rather than on your target.
Why is dividing my target salary by 2,080 hours wrong?
Because it makes three assumptions that are all false for a freelancer. It assumes every working hour is billable — yours are not; sales, admin, invoicing, and unpaid revisions take a large share. It assumes you never take time off, whereas 2,080 is 52 weeks of 40 hours with no holiday and no sick leave. And it ignores self-employment tax entirely, which is 15.3% on 92.35% of net earnings on top of income tax.
On this page's inputs, 2,080 gives $40.87/hour. The honest figure is $133.29 — 3.3 times higher. That ratio is why so many people leave a salaried job, charge what feels like a generous rate, and end the year worse off.
What salary is my freelance rate equivalent to?
Taking home $85,000 as a freelancer is worth a salary of about $136,276 if you would be buying your own health cover in that job too, or about $127,276 if an employer carried the premium. Both are solved by running the same money through this site's payroll model rather than estimated with a rule of thumb.
Note the direction people usually get wrong: you must bill $153,278 to match a $136,276 salary — about $17,002 more — because employer-side payroll tax, expenses, and benefits all come out of your billings and none of them come out of a salary.
Do I pay self-employment tax on my health insurance premiums?
Yes, and this is the single most expensive detail freelancers miss. The self-employed health insurance deduction is an above-the-line income tax deduction — it does not reduce net earnings from self-employment, so it does not reduce self-employment tax. An employee's premium under a Section 125 plan is excluded from income tax and from FICA.
On the $9,000 premium in this example, that asymmetry costs $1,271.66 a year in self-employment tax — an effective 14.13% on money that an employee moves entirely tax-free. It is not a loophole you are missing; it is how the deduction is written. The only structural fix is an entity election that changes how your earnings are characterised, which is a conversation for an accountant and only worth having above a certain income.
How many billable hours a week is realistic?
Below what you would guess. This example assumes 25 billable hours a week, which is 63% utilisation against a 40-hour week. Sustained utilisation above roughly 70% is rare for independents, because finding the next piece of work is itself unpaid and never stops.
The practical test is to look back at a real month of invoices and divide the hours you charged for by the hours you were at your desk. Most people find the answer is between 50% and 65%. If you build your rate on 80% and deliver 55%, you are roughly a third short of your target income and the shortfall will not be visible until the year is over.
How much does taking holiday cost me?
Every week off has to be paid for by the weeks you do work, so it raises the rate you must charge. Solved across this example's inputs:
- No time off at all → $117.91/hour
- 2 weeks off → $122.62/hour
- 4 weeks off → $127.73/hour
- 6 weeks off → $133.29/hour
- 8 weeks off → $139.34/hour
- 10 weeks off → $145.98/hour
Going from 0 to 10 weeks off costs $28.07 an hour — about 24% on your rate. This is not an argument against taking holiday. It is an argument for pricing it in deliberately, because the alternative is taking it anyway and quietly missing your income target.
Should I quote a day rate instead?
Often yes. An 8-hour day at $133.29 is $1066.32, and a day rate removes the incentive for a client to audit your hours while protecting you from the half-day that consumes a whole day anyway. It also makes a week — $3332.25 here at 25 billable hours — a natural unit to sell. See the day rate calculator.
Where these numbers come from
Rates last checked against the sources below on .
Rate schedule version 2026.1, effective .
- IRS Rev. Proc. 2025-32 — inflation adjustments for tax year 2026 retrieved 2026-08-02
- IRS Topic 751 — Social Security and Medicare withholding rates retrieved 2026-08-02
- IRS — COLA increases for dollar limitations on benefits and contributions retrieved 2026-08-02
- IRS Rev. Proc. 2025-19 — 2026 HSA and HDHP inflation adjustments retrieved 2026-08-02
- IRS Publication 15-T — Federal income tax withholding methods
- IRS Form 1040-ES — Estimated tax for individuals