How this calculator works
Your hourly rate has to cover three things: the money you want to keep, the taxes you'll owe on the money you earn, and the expenses of running the business itself. Then it has to divide across realistic billable hours (not your total waking hours).
We compute: Revenue needed = (Take-home + Expenses) / (1 - Tax rate). Then Hourly rate = Revenue needed / (Billable weeks × Billable hours).
The two biggest mistakes freelancers make are (1) using 40 billable hours per week (you won't, because of admin, sales, and breaks) and (2) using a W-2 tax rate instead of a self-employment rate. Self-employed people pay the full 15.3% FICA themselves, not the 7.65% a W-2 employee pays.
FAQ
What's a realistic number of billable hours per week?
Most full-time freelancers bill between 20 and 30 hours of a 40-hour work week. The other 10-20 go to sales, admin, accounting, email, learning, and the inevitable stuff that isn't client work. 40 billable hours a week is unrealistic long-term.
What tax rate should I use?
A rough starting point: 15.3% self-employment tax + your federal income tax bracket + your state income tax. For a mid-income solo freelancer in most states, that's often 25-35% in total. Your CPA's number is the real one.
Does this account for health insurance?
Put your annual health insurance premiums into the "business expenses" field. That's how most freelancers deduct it. Your accountant may be able to pull it further if you're eligible for the self-employed health insurance deduction.
Should I actually charge this exact rate?
This is your floor. Charge above it when the client, project, or specialty can bear it. This number tells you when to say no to projects that pay less.
What about retainers and flat-rate projects?
Estimate the hours the project will take, then multiply by this rate. If you're worried about scope creep, add a 20-30% cushion. Under-scoping is the other big mistake freelancers make.
How is this different from a W-2 take-home calculator?
A W-2 paycheck calculator assumes your employer covers half of FICA. As a 1099 contractor you pay both halves, which effectively raises your tax burden by about 7.65%.