What this calculator does
Find the lowest hourly rate you can charge as a freelancer and still reach your income goal. This calculator works backward from the money you want to keep. It adds the tax you'll owe and the costs of running your business to that goal. Then it spreads the total over the hours you can actually bill. The answer is the lowest hourly rate that pays for everything, plus a matching day rate.
Many new freelancers take their old salary, divide it by 2,080 hours (40 hours times 52 weeks) and charge that. The result is usually far too low. An employee's salary comes with paid holidays, equipment and benefits. The employer also pays a share of payroll taxes, and every hour at work counts. As a freelancer, you pay for all of that yourself. And a large part of your week goes on work you can't bill, such as finding clients, quoting, invoicing and admin.
Where it's used
Why this math matters outside the classroom:
- Setting a first rate. A designer wanting $70,000 after 25% tax and $9,000 of costs, billing 1,150 hours, finds a floor of about $88.99 an hour.
- Quoting a day rate. A consultant with a $90 hourly floor who quotes 7 billable hours a day sets a day rate of at least $630.
- Leaving a salaried job. An engineer compares a $95,000 salary with the freelance rate needed once insurance and unpaid weeks are added to costs.
- Raising prices. A photographer whose costs rise from $9,000 to $12,000 sees the needed rate climb by $3,000 ÷ 1,150 hours, about $2.61.
- Business class problems. Students solve for a price per hour when revenue must cover a fixed cost plus a target profit over a known number of hours.
Grade level and standards: Grade 7; Common Core State Standards for Mathematics 7.EE.B.3, 7.RP.A.3. © Copyright 2010. National Governors Association Center for Best Practices and Council of Chief State School Officers. All rights reserved.
How to use it
- Enter the income you want to keep each year after tax. Then enter the share of profit you expect to set aside for tax.
- Enter your yearly business expenses.
- Enter the hours a week you can realistically bill, and the weeks a year you won't be billing.
- Read your minimum hourly rate and day rate. Then set your actual price at or above them.
What the inputs mean
- Take-home income goal
- The amount you want left for yourself after business costs and tax. If you'd rather think in before-tax terms, enter that figure and set the tax to 0%.
- Tax set aside
- One combined percentage of your profit, covering income tax and self-employment tax. It depends on where you live and your other income. Use your own estimate or an accountant's.
- Business expenses
- Costs a client never sees: software, a computer, phone and internet, insurance, accounting, workspace and travel. For many people, it also includes health cover and retirement saving.
- Billable hours per week
- Billable hours are the hours on client work that you can invoice. Twenty to thirty a week, out of a forty-hour week, is common once sales and admin are counted.
- Weeks off per year
- Count vacation, public holidays, sick days and the quiet weeks between projects.
- Billable hours in a day rate
- Used only for the day rate. Some freelancers count a day as 8 hours. Others count it as 6 or 7 billable hours.
Formula and method
profit needed = goal ÷ (1 − tax rate) revenue needed = profit needed + business expenses billable hours = (52 − weeks off) × billable hours per week minimum hourly rate = revenue needed ÷ billable hours day rate = hourly rate × billable hours per day
Tax is charged on profit, which is your revenue (everything clients pay you) minus business expenses. You keep (1 − tax rate) of each dollar of profit. So to reach your goal, divide the goal by that share. Expenses are added afterward, because they're paid before profit is counted.
The year has 52 weeks. Take away your weeks off, then multiply by the billable hours in each working week. That gives the hours you can charge for. The revenue you need is then spread over those hours.
Worked example
You want to take home $70,000 a year and set aside 25% of profit for tax. You have $9,000 of business expenses, bill 25 hours a week and take 6 weeks off. A day counts as 8 hours.
- Profit needed: $70,000 ÷ (1 − 25%) = $93,333.33.
- Revenue needed: $93,333.33 + $9,000 = $102,333.33.
- Billable hours: (52 − 6) × 25 = 1,150 hours.
- Minimum hourly rate: $102,333.33 ÷ 1,150 = $88.99.
- Day rate: the unrounded hourly rate ($88.9855…) × 8 = $711.88.
Result: You need to charge at least $88.99 an hour, or $711.88 a day. That brings in about $8,527.78 a month on average.
Understanding the result
The result is a floor, not a price. Below it, you fall short of your goal even if you sell every billable hour. How far above it you can charge depends on market rates, your experience and how much the work is worth to the client.
Notice how much the rate depends on billable hours. Dropping from 25 to 20 hours a week raises the rate you need by a quarter. That's why protecting your billable time matters as much as raising prices.
If the rate looks unrealistic for your field, you have four levers. You can cut expenses, bill more hours, take fewer weeks off or lower your goal for now.
Assumptions and limitations
- Tax is one flat percentage of profit that you choose. No tax brackets, deductions or credits are applied.
- Every billable hour is sold at the same rate, and income comes in evenly across the working weeks.
- Expenses are a fixed yearly amount that doesn't change with the hours you bill.
- It doesn't allow for late payments, clients who never pay, or gaps between contracts beyond the weeks off you enter.
- It doesn't add extra profit for growing the business or building savings. If you want that, include it in your goal or your expenses.
- This is planning math, not tax or business advice.
Frequently asked questions
How do I turn my old salary into a freelance rate?
Use your old take-home pay as the goal. Then add the benefits your employer paid for, such as health cover and retirement contributions, to your expenses. The calculator shows what you must bill to match that job. The answer is usually well above the salary divided by 2,080.
How many billable hours a week is realistic?
It varies by field, but very few freelancers bill a full 40 hours. Finding work, writing proposals, invoicing, bookkeeping and keeping your skills up to date all take time. Track your hours for a few weeks, and use the billable share you actually reach.
Should I charge by the hour, the day or the project?
Whichever you choose, this hourly figure is your measuring stick. For a fixed-price project, estimate the hours and multiply by your rate. Then add a cushion in case the job takes longer. For a day rate, multiply the hourly rate by the billable hours you count in a day.
What tax rate should I enter?
Self-employed people usually owe two kinds of tax on profit. There's income tax, plus a self-employment or social contribution tax. So the combined share can be large. The right figure depends on where you live, your other income and your deductions. Use last year's return or ask a tax professional. The calculator only applies the percentage you enter.
How this calculator is checked
Method: Cost-plus pricing: required revenue (after-tax goal grossed up by a flat tax rate, plus expenses) divided by yearly billable hours. The calculation is covered by automated tests with known reference values and edge cases. Last updated 2026-10-18. Found a problem? Tell us.
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