How this calculator works
The formula: your hourly rate = (target income + expenses) ÷ (1 − tax rate) ÷ billable hours per year. Billable hours = hours per week × (52 − weeks off). Dividing by (1 − tax rate) grosses up your target so taxes are covered, and only billable hours count — the admin, marketing, and sales time every freelancer spends isn't paid by clients.
Why billable hours matter so much
A 40-hour work week usually means only 20–30 billable hours. If you assume 40 billable hours and actually bill 25, you'll earn nearly 40% less than planned. Be honest about non-billable time; it's the single biggest correction in this calculator.
Don't forget platform fees: Upwork takes 10%, Fiverr 20%. Either add them to your expenses or raise your combined tax + fee rate.
Worked example: a $75,000 target at 20 billable hours
Say a consultant wants $75,000 of take-home pay, carries $5,000 of yearly business costs, can bill 20 hours a week with 4 weeks off, and assumes a combined 28% tax and fee rate:
- Billable hours: 20 × (52 − 4) = 960 hours/year
- Gross up for tax: ($75,000 + $5,000) ÷ 0.72 = $111,111.11
- Rate: $111,111.11 ÷ 960 = $115.74/hour
Check it in reverse: $115.74 × 960 = $111,110.40, and keeping 72% of that after tax and fees leaves roughly $80,000 to cover the $75,000 target plus $5,000 of costs — small rounding differences are normal. Try nearby inputs in the calculator above: dropping to 15 billable hours a week pushes the same target to about $154/hour, which is why part-time freelancers often look "expensive" when they are simply being honest about capacity.
Formula: Rate = (target income + expenses) ÷ (1 − tax rate) ÷ billable hours per year.
How sensitive the answer is to your tax assumption
Holding the same $80,000 base ($75,000 target plus $5,000 of costs) and 960 billable hours, only the combined tax and fee rate moves:
| Combined tax + fee rate | Revenue needed | Required rate |
|---|---|---|
| 20% | $100,000.00 | $104.17/hr |
| 28% | $111,111.11 | $115.74/hr |
| 35% | $123,076.92 | $128.21/hr |
Seven points of tax assumption move the rate by more than $12 an hour — so if half your work flows through a 10–20% platform, count that fee inside the combined rate rather than absorbing it silently.
What this leaves out
Three gaps deserve a deliberate adjustment. Utilization drift: the billable-hours figure you type in January is a forecast — track one real month of hours, tag each one billable or not, and re-run the calculator with the measured percentage. Late and unpaid invoices: the formula assumes every billed hour is paid in full and on time, so freelancers with slow-paying clients should add a 3–5% bad-debt allowance to expenses or shorten payment terms instead. Scope creep and fixed-price work: quoted projects routinely expand 10–20% beyond the estimate, which silently cuts the realized hourly rate — either pad fixed quotes or bill overruns as change orders. The calculator also builds in no profit buffer for dry spells, so add one to your income target if you want savings rather than just survival.
Sources: the tax gross-up uses whatever combined rate you enter — for the US self-employment component behind that rate, see the IRS self-employment tax rules (15.3% of net earnings above $400).
Every figure above is hand-checked: the worked example was recomputed independently of the calculator code, and tax figures track 2026 IRS limits. How we check every page.
Related calculators
Once the hourly number is set, check it against the rest of the pricing stack: the contract rate converter grosses a salary up to the rate a contractor needs, the day rate calculator works backwards from a daily quote, and freelance rates by country shows what the same work pays in different markets. The full walkthrough — formula, worked examples, and the billable-hours trap — is in the hourly rate guide.