How to Set Your Freelance Rate (Without Underpricing)
Most freelancers pick a number that feels right and quietly lose money on it. Here’s how to set a rate that actually pays your bills.
The trap: salary ÷ 2,080
The instinct is to take a salary you’d like — say $80,000 — and divide by 2,080 working hours to get about $38/hour. It feels reasonable. It’s also a fast way to go broke, because it ignores three expensive realities of self-employment.
The three things a salary hid from you
- Taxes. You now pay both halves of self-employment tax (~15.3%) plus income tax. Your gross has to be bigger to leave the same take-home.
- Expenses and benefits. Software, gear, insurance, retirement, time off — all on you now, not an employer.
- Unpaid time. Only part of your week is billable. Sales, admin, invoicing, and gaps between clients don’t pay, but they eat hours.
Set your rate by working backwards
Instead of dividing a salary, build the rate up from what you need to keep:
- Start with your target take-home income.
- Add your annual business expenses.
- Gross up for taxes so what’s left after tax equals your goal.
- Divide by your real billable hours — billable weeks × billable hours per week.
- Add a small buffer for slow months and late payers.
Run those numbers honestly and the rate almost always lands higher than salary-÷-2,080 — because that shortcut was quietly underpaying you.
Do the math instantly. The Freelance Rate Calculator works backwards from your income goal and shows the exact hourly rate you need — plus a breakdown of where every dollar goes.
Turn the number into prices
Use your rate as an internal floor, not a public ceiling. Quote fixed-fee projects as estimated hours × your rate plus a buffer for scope risk, and raise it for rush work or specialized expertise. Curious what you actually earned on past work? The Effective Hourly Rate Calculator divides what you were paid by the hours it really took.
The takeaway
Don’t price from your old salary. Price from the income you want, the costs you carry, and the hours you can truly bill. That’s the rate that keeps you in business.
Frequently asked questions
How do I calculate my freelance hourly rate?
Start from the take-home income you want, add your business expenses, gross it up to cover taxes, then divide by the hours you can actually bill in a year (billable weeks × billable hours per week). That gives your minimum rate.
Why can’t I just divide my old salary by 2,080?
Because that ignores self-employment tax, the benefits and expenses your employer used to cover, and the fact that a big share of your week is unpaid admin and sales. Charging your old hourly wage means earning far less than you did employed.
How many hours can I realistically bill?
Most freelancers bill 20–30 hours a week even when fully booked, once you subtract sales, admin, and gaps between projects. Using an honest billable number is the biggest reason a proper rate comes out higher than people expect.