What Should You Actually Charge?

Start with your desired annual take-home pay, then work backwards: add self-employment tax (15.3% on 92.35% of net income), federal income tax (2026 brackets), state income tax, and business expenses to get the gross revenue you need. Divide that by your annual billable hours (hours per week × weeks worked per year) to get your minimum hourly rate. Add a profit margin (typically 20%) to get your recommended rate. This calculator does all that math automatically.

As a freelancer, you pay both the employer and employee halves of FICA taxes (15.3% SE tax), your own health insurance, retirement contributions, and all business expenses — costs employers typically cover. You also don't get paid for vacation, sick days, or holidays. A $100K salary employee costs their employer roughly $120–130K total. As a freelancer, you need to cover all of that overhead in your rate — plus the uncertainty premium for income variability.

A profit margin buffer (typically 20%) adds room above the minimum rate that just covers taxes and expenses. It accounts for: unbillable time (client calls, proposals, admin work), slow periods between clients, unexpected expenses, savings and retirement contributions, and the fact that you won't fill every planned billable hour. Without a buffer, your minimum rate assumes 100% utilization — which never happens in practice.

Most full-time freelancers bill 4–6 hours per day of an 8-hour day (50–75% utilization), with the rest going to admin, sales, and business development. For a realistic 40-hour week, 25–30 billable hours is more accurate than 40. For weeks worked, 48 weeks per year (4 weeks off for vacation, holidays, and slow seasons) is a solid baseline. New freelancers should be more conservative; established freelancers with recurring clients can be more aggressive.

Include all deductible business expenses you expect annually: home office (% of rent/mortgage), internet and phone (business portion), software subscriptions (Adobe, Notion, Figma, etc.), equipment, health insurance premiums (if self-employed), retirement contributions (SEP-IRA, Solo 401k), professional development, marketing and advertising, and accounting/legal fees. These reduce your net SE income, which lowers both your SE tax and income tax — so including them gives a more accurate rate.

All three work. Hourly protects you from scope creep but can feel transactional and caps your earnings (you can't earn more than your rate × hours). Day rates work well for on-site work and short engagements. Project rates reward efficiency — once you're fast at a type of work, you earn well above your hourly equivalent — but require accurate scoping. Most experienced freelancers use project rates for defined deliverables and day/hourly for ongoing or undefined work.

SE tax is 15.3% on 92.35% of your net self-employment income — roughly 14.1% of your gross freelance income. Unlike an employee who pays 7.65% (the IRS splits FICA 50/50 between employer and employee), freelancers pay both halves. On $100K net income, SE tax alone is ~$14,130. The IRS lets you deduct 50% of SE tax from income before calculating federal tax, which partially offsets the impact, but SE tax is still a major reason why freelance rates need to be significantly higher than equivalent employee salaries.

The minimum rate covers your take-home target, all taxes, and expenses — assuming every hour you plan to work gets billed and paid. The recommended rate adds a profit margin buffer (20% by default) to account for non-billable time, gaps between clients, and unexpected costs. In practice, always quote the recommended rate (or higher). The minimum rate is the floor — not the target.