Why Salary Divided by 2,080 Fails
An employee is paid for about 2,080 hours a year: 40 hours for 52 weeks. A freelancer is paid only for hours a client agrees to buy. Time spent finding clients, writing proposals, sending invoices and fixing your own tools earns nothing.
Take 4 weeks off and bill 30 hours in each of the other 48 weeks. That is 1,440 billable hours, about 69% of an employee's year. The same income has to fit into fewer paid hours, so the hourly number rises before you add a single cost.
What the Rate Has to Cover
Here is the full bill for $75,000 of take-home. Each line is the cost spread over your 1,440 billable hours.
| Cost | Per year | Per billable hour |
|---|---|---|
| Take-home you want | $75,000 | $52.08 |
| Business expenses | $2,400 | $1.67 |
| Health insurance | $4,800 | $3.33 |
| Retirement saving | $6,000 | $4.17 |
| Self-employment tax | $16,395 | $11.39 |
| Federal income tax | $13,838 | $9.61 |
| Revenue to bill | $118,433 | $82.24 |
Taxes take $20.99 of every billable hour. Self-employment tax alone is $11.39, because you pay both the employer and employee halves of Social Security and Medicare. The tax figures use 2026 federal rules, a single filer and the standard deduction, and they are figured on the revenue you bill after business expenses and the health insurance deduction.
The example treats retirement saving as after-tax money. If you put it into a deductible plan such as a SEP-IRA, your tax bill falls and the rate you need falls with it. Set the retirement line to $0 and the rate drops from $82.24 to $75.88.
Billable Hours Move the Rate the Most
No other input changes the answer as much. Same income, same costs, different billable hours:
| Billable hours a week | Billable hours a year | Rate needed |
|---|---|---|
| 15 | 720 | $164.49 |
| 20 | 960 | $123.37 |
| 25 | 1,200 | $98.69 |
| 30 | 1,440 | $82.24 |
| 35 | 1,680 | $70.50 |
At 15 billable hours a week the rate needed is $164.49. At 35 it is $70.50. If you assume you will bill 35 hours and actually bill 20, you are charging $70.50 when you needed $123.37. Track your real billable hours for a month before you set a number.
Treat the Hourly Rate as a Floor
This number is the least you can charge and still hit your goal. It is not what the work is worth. For a fixed-price project, estimate the hours, multiply by your floor rate, then price above that if the result is worth more to the client than the hours it takes you. A rate that covers your costs keeps you solvent. A price based on the value you deliver is how you earn more than the floor.
Add padding for what hours estimates miss: revisions, calls and a late client. If a project takes 20 hours of work, plan on more than 20 billable hours to deliver it.
Check Your Own Numbers
The example assumes a state with no income tax. Your state tax, expenses and health insurance cost will change the answer. The calculator below uses the same model and lets you enter your own.
Enter your target income, billable hours, costs and state to get your hourly rate:
Freelancer Rate Calculator →Disclaimer: This article is for educational purposes only and does not constitute tax, legal or financial advice. Figures use 2026 federal rules and a simplified single-filer example with no state income tax. Your tax depends on your state, deductions, credits and other income. Consult a qualified tax professional for your situation.