Freelance hourly rate formula
Your rate has to cover four things before you see a dollar of income: business costs, the benefits an employer used to pay, the employer's share of payroll tax, and the hours you work but cannot bill.
With the example inputs: $116,362 ÷ 1288 billable hours = $90.34. An employee earning $75,000 makes about $36.06 an hour over 2,080 paid hours, so the freelance rate is 2.5 times the employee wage for the same take-home.
Self-employment tax in 2026
Self-employment tax is 15.3% of 92.35% of your net earnings: 12.4% for Social Security and 2.9% for Medicare, the two halves an employer and employee would otherwise split.[1]
| Item | 2026 rule |
|---|---|
| Net earnings factor | 92.35% of net profit |
| Social Security | 12.4%, on net earnings up to $184,500 |
| Medicare | 2.9% on all net earnings |
| Additional Medicare tax | 0.9% above $200,000 (single); not included in the calculator |
| Minimum | No SE tax if net earnings are under $400 |
| Deduction | Half of SE tax is deductible from income for income tax |
The $184,500 Social Security wage base for 2026 comes from the Social Security Administration's annual announcement.[2] SE tax is in addition to income tax, and self-employed people usually pay both through quarterly estimated payments.[3]
Billable hours change everything
Few freelancers bill every hour they work: proposals, invoicing, admin and finding the next client take time. Same income goal, different billable shares:
| Billable share | Billable hours | Hourly rate | Day rate (8 h) |
|---|---|---|---|
| 50% | 920 | $126.48 | $1,011.84 |
| 60% | 1104 | $105.40 | $843.20 |
| 70% | 1288 | $90.34 | $722.74 |
| 80% | 1472 | $79.05 | $632.40 |
| 90% | 1656 | $70.27 | $562.13 |
The benefits line matters too. In the Bureau of Labor Statistics' Employer Costs for Employee Compensation, benefits made up 30.0% of total compensation for private industry workers (June 2026).[4] A freelancer who prices at an employee's hourly wage gives that share away.
From hourly rate to project price
- Day rate: multiply by the hours you can bill in a day, usually 6 to 8.
- Project price: estimate the hours, add a contingency for revisions, and multiply. Check it against the profit calculator if the project has material costs.
- Retainers: price a block of hours at or slightly below the hourly rate in exchange for predictable income.
- Card payments: if clients pay invoices by card, the processor's fee comes out of your rate; see the Stripe fee calculator or the PayPal fee calculator.
The rate here is a floor that pays your costs. What the market will pay depends on your field and experience; if the floor is above it, the break-even calculator shows how many hours you would need at the lower rate.
Frequently asked questions
How do I calculate my freelance hourly rate?
Add your target income, benefits, self-employment tax and business expenses, then divide by the hours you can bill in a year (weeks worked × hours per week × billable share).
Why should a freelance rate be higher than an employee wage?
Because you pay both halves of Social Security and Medicare, your own benefits and equipment, and you are not paid for unbillable hours, holidays or sick days.
How many billable hours does a freelancer have in a year?
It varies, but working 46 weeks of 40 hours with 70% billable gives 1,288 hours, compared with 2,080 paid hours for a full-time employee.
Does the calculator include income tax?
No. The income you enter is before income tax, the same way a salary is quoted. Self-employment tax is included because an employee's salary would not bear it.
What is a day rate?
A price for a full working day, usually the hourly rate times 6 to 8 billable hours.