How to calculate your freelance hourly rate (with 2026 tax numbers)

Most freelancers set their first rate by taking an old salary and dividing by 2,080 hours. That number is almost always too low. It ignores the taxes an employer used to pay, the tools you now buy yourself, and the hours you spend not billing.

Here is a method that works backward from the money you actually need to keep.

The short version

1. Decide your yearly take-home pay.
2. Add income tax and self-employment tax to get the net profit you need.
3. Add business expenses to get the revenue you need.
4. Count the hours you can really bill in a year.
5. Divide revenue by billable hours. Round up.

A worked example

Take a designer who wants to keep $72,000 a year after taxes. These are the inputs:

Input	Value
Take-home pay	$72,000
Business expenses	$8,400 ($700 a month)
Estimated income tax (federal + state)	15%
Weeks off	6
Billable hours per week	25

Step 1 and 2: from take-home to net profit

Two taxes come out of profit. Self-employment tax is 15.3% on 92.35% of net profit, according to IRS Topic 554. Income tax depends on your state and household, so we use an estimated effective rate of 15%, applied to profit minus half of the SE tax (the IRS lets you deduct that half).

To keep $72,000, our designer needs a net profit of $100,097.09:

Line	Amount
Net profit	$100,097.09
Self-employment tax	−$14,143.27
Income tax (15% of $93,025.45)	−$13,953.82
Take-home	$72,000.00

The $93,025.45 is profit minus half of the SE tax ($7,071.64).

Step 3: add expenses

$100,097.09 + $8,400 = $108,497.09 in revenue. That is what has to be invoiced and collected in the year.

Step 4: count billable hours

52 weeks − 6 weeks off = 46 working weeks. At 25 billable hours a week, that is 1,150 hours.

Why 25 and not 40? Because email, invoicing, sales calls, proposals and learning take real time, and no client pays for it. We cover this in how many billable hours freelancers really have.

Step 5: divide

$108,497.09 ÷ 1,150 = $94.345. Rounded up: $94.35 an hour. A full eight-hour day is $754.80.

Compare that with the salary shortcut: $72,000 ÷ 2,080 = $34.62. The shortcut would leave this designer about $60 an hour short.

What moves the number most

Billable hours matter more than anything else. Same designer, same take-home, same 6 weeks off:

Billable hours per week	Hours per year	Minimum rate	Day rate (8 h)
20	920	$117.94	$943.52
25	1,150	$94.35	$754.80
30	1,380	$78.63	$629.04

Time off matters too, but less:

Weeks off	Billable hours	Minimum rate
4	1,200	$90.42
6	1,150	$94.35
8	1,100	$98.64
10	1,050	$103.34

And your income tax estimate:

Income tax estimate	Net profit needed	Minimum rate
10%	$94,023.10	$89.07
15%	$100,097.09	$94.35
20%	$107,010.04	$100.36
25%	$114,948.68	$107.26

How to pick your income tax percentage

Use an effective rate, not your top bracket. Your effective rate is total income tax divided by income. Last year's return is the easiest place to find it. If this is your first year freelancing, the 2026 tax rate schedules in Form 1040-ES and your state's rates give a starting point. A tax professional can tighten the estimate.

Remember that freelancers pay during the year, not in April. The IRS due dates for 2026 estimated payments are April 15, June 15 and September 15, 2026, and January 15, 2027.

A minimum is not a price

The number you get is a floor. Below it, you are paying to work. Your actual price can be higher, based on what the work is worth to the client, your experience and the market. A few habits help:

• Round up to a clean number. $94.35 becomes $95 or $100.
• Add a margin for slow months. A 10% to 20% cushion pays for gaps between projects.
• Quote projects, not just hours, when you can. Our project quote guide shows how.
• Recheck every year. The Social Security wage base rises most years. It is $184,500 in 2026 and SSA has announced $192,300 for 2027.

Run your own numbers in the freelance rate calculator. It opens with this example filled in.