How the Freelancer Rate Calculator Works

The Core Formula

Minimum Rate = (Target Income + SE Tax + Health Insurance + Retirement + Expenses) / Billable Hours

Your minimum rate is the hourly amount you must charge to cover every cost and take home your income goal — with zero profit cushion. Your recommended rate adds a profit margin on top of that.

Self-Employment Tax (15.3%)

Unlike employees who split FICA taxes with their employer, freelancers pay both sides: 12.4% Social Security + 2.9% Medicare = 15.3% total. This applies to 92.35% of net self-employment income (after the half-SE-tax deduction). We calculate this automatically based on your income goal and add it to your total cost basis.

Example: $100,000 income goal → ~$14,130 in SE tax → your rate must cover $114,130 before benefits and expenses.

Billable Hours Calculation

We calculate effective billable hours as your stated annual billable hours minus your PTO days (converted to hours at 8 hrs/day). For example, if you enter 1,200 billable hours and 15 PTO days, your effective billable hours are 1,080. This is the denominator in your rate calculation.

Be realistic: if you work 40 hrs/week but only 60% are genuinely billable, your starting number should be 1,248, not 2,080.

Retirement Contribution

We calculate your annual retirement contribution as a percentage of your target income. A 10% contribution on a $100,000 income goal = $10,000/year that must be covered by your rate before you see the money. Solo 401(k) and SEP-IRA contributions are both pre-tax, reducing your overall tax burden.

Profit Margin

Your recommended rate multiplies your minimum rate by (1 + profit margin %). A 20% margin on a $75/hr minimum gives a $90/hr recommended rate. This cushion covers slow months, unexpected expenses, scope creep, and reinvestment in your business.

Accuracy Notes

• Uses 2026 federal SE tax rates (15.3% on 92.35% of net earnings)
• State income taxes and local taxes are not included — consult a CPA for your full picture
• Health insurance premiums vary significantly by plan, age, location, and whether you have dependents
• All calculations run in your browser — no data is stored or transmitted
• Results are estimates for planning purposes, not financial or tax advice

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