How the Freelance Rate Calculator works

The core idea is simple: your business needs enough revenue to cover your target income plus business costs, and you can only earn that revenue during your billable hours. That means your hourly rate is basically:

• Billable hours per year = billable hours/week × weeks/year × utilization
• Required revenue = adjusted target income (plus overhead, benefits, buffer)
• Hourly rate = required revenue ÷ billable hours per year

If your target is after tax (take-home), we first convert it to a gross number using your tax set‑aside percentage, so you’re not accidentally pricing like taxes don’t exist.

• Utilization factor = utilization% ÷ 100
• Tax factor = tax% ÷ 100
• Cost multiplier = 1 + overhead% + benefits% + buffer%
• Gross target = (targetIncome) if “before tax”, else targetIncome ÷ (1 − taxFactor)
• Required revenue (before tax set-aside) = grossTarget × costMultiplier
• Billable hours/year = billableHoursWeek × weeksPerYear × utilizationFactor
• Hourly rate = requiredRevenue ÷ billableHoursYear
• Suggested tax set-aside per hour = hourlyRate × taxFactor
• Day rate = hourlyRate × billableHoursDay
• Project quote = hourlyRate × projectHours × (1 + projectBuffer%)

These are meant to be practical. If you want to get even more detailed, treat “overhead%” as the percent of income that disappears into operating costs — and adjust until it matches your reality.

Example freelance rate calculations

Here are three real-world style examples. You can reproduce them instantly with the Load Example button, then tweak one input at a time to see which variable moves your rate the most.

• Target (gross): $120,000
• Billable: 25 hrs/week, 46 weeks/year, 60% utilization
• Overhead 15%, benefits 10%, tax set-aside 25%, buffer 10%
• Result: a “realistic floor” rate that can survive admin time and vacations.

• Target (gross): $180,000
• Billable: 20 hrs/week, 44 weeks/year, 55% utilization
• Overhead 12%, benefits 8%, tax set-aside 30%, buffer 20%
• Result: higher hourly rate, but fewer hours sold — often a better lifestyle.

• Target (after tax): $90,000
• Tax set-aside 25% → gross target becomes $120,000
• Everything else equal, your rate rises because taxes must be funded first.

Most freelancers discover the same thing: utilization is the lever. If you assume 80% utilization but you’re actually at 40%, your rate is quietly underpriced by a lot.

Hourly vs day rate vs project pricing

Clients often ask for an hourly rate because it feels comparable, but your best pricing strategy depends on the work. Here’s a practical way to use the output:

• If a client wants hourly, don’t go below your calculator floor unless you’re deliberately buying experience.
• Raise your floor when you’re consistently booked or when projects routinely expand in scope.

• Day rate is just hourly × billable hours/day, but it’s easier to quote and reduces micro-tracking.
• Many freelancers bill minimum 1 day even for shorter tasks.

• Projects have risk: scope creep, feedback cycles, approvals, dependency delays.
• The project buffer % is your “I’ve seen this movie before” protection.

If you want to go more viral: post a screenshot of your rate and caption it “I stopped undercharging when I started pricing for utilization.” People share that because it’s painfully true.

Frequently Asked Questions

• What is utilization and what should I use?

  Utilization is the percent of your working time that’s billable. If you work 40 hours but only bill 20, your utilization is 50%. Many solo freelancers land between 40%–70% depending on marketing, admin load, and whether they have retainers.

• Should I include taxes in my rate?

  Yes — if you don’t set it aside, you’ll either panic later or borrow from your savings. This calculator doesn’t predict exact tax law; it simply helps you build a habit of funding taxes from every invoice.

• Is “overhead %” the same as expenses?

  Overhead% is a shortcut: it represents the portion of your revenue that goes to business costs over the year. If your expenses are $12k and you want $120k gross income, that’s roughly 10% overhead.

• Why is my hourly rate higher than my old job’s hourly?

  Employees are paid for more “covered” time: benefits, payroll taxes, downtime, and often equipment. Freelancers must fund those things themselves and also pay for non-billable work like selling and admin.

• What if a client says my rate is too high?

  You have three levers: reduce scope, extend timeline, or increase value. If the work is still not viable, it’s often better to walk away than to accept a rate that blocks your goals.

• Should I price hourly or value-based?

  When possible, value-based pricing is better (clients buy outcomes). But you still need a baseline floor so “value pricing” doesn’t turn into “wishful thinking.” Use this calculator to set that floor.