Freelance Pricing: Work Backwards From the Income You Want
Most freelancers price by guessing what sounds reasonable, then discover their effective hourly rate after taxes is barely above their old salary. The fix is to work backwards from the income you want to keep.
- Only 60–70% of a freelancer's week is billable; assuming 40 billable hours guarantees underpricing.
- Self-employment tax alone adds ~15.3% before income tax — plan an effective 25–35% total.
- The formula: rate = target income ÷ (1 − tax) ÷ (1 − expenses) ÷ billable hours.
Why the salaried anchor fails
A $50/hour salary is not a $50/hour freelance rate. The freelancer pays both halves of FICA, buys their own insurance and retirement, supplies equipment and software, and — critically — cannot bill all 2,080 hours. Sales calls, admin, invoicing and learning consume 30–50% of a normal work week.
The comparison that matters is effective rate: what you actually clear per hour of total work, not per billable hour. That number is almost always the shocking one for new freelancers.
The backwards calculation
Start with take-home target, say $80,000. Divide by (1 − 0.30) for taxes: $114,285 pre-tax profit. Divide by (1 − 0.15) for business expenses: $134,453 in revenue. Divide by realistic billable hours — 25 hours × 46 weeks = 1,150 — and the required rate is $116.92/hour.
That is 2.3× the naive $50 anchor. Our freelance hourly rate calculator runs this chain with your own numbers, and the output is a floor, not a ceiling.
Beyond hourly: value and project pricing
Hourly pricing caps your income at hours × rate and punishes efficiency. Once you know your true cost floor, project and value-based pricing let you capture the value created rather than the time consumed.
The discipline that makes either model work: know your floor (the backwards calculation), raise rates on new clients regularly, and let chronically price-sensitive clients graduate to competitors.
Try the calculators
Freelance Hourly Rate Calculator
Work backwards from the income you want: enter your target income, tax rate, business expense share and realistic billable hours to get the hourly rate you actually need to charge.
Take-Home Pay Calculator (US)
Estimate your net (take-home) pay in the US: enter gross annual salary, filing status and a state tax rate to see estimated federal tax, FICA and your monthly paycheck.
Salary to Hourly Calculator
Convert an annual salary into hourly, weekly, monthly and daily pay.
Frequently asked questions
How many billable hours should I plan for?
20–28 per week is realistic for a solo freelancer with a healthy pipeline. Plans built on 40 billable hours fail systematically.
How often should freelancers raise rates?
A 5–10% annual increase for existing clients plus a larger reset whenever your pipeline stays full for a quarter is a sustainable rhythm.