If you've ever Googled "how much should I charge as a freelancer," you've probably gotten some version of the same unhelpful advice: "charge what you're worth." Thanks. Very actionable.
The truth is, your freelance rate isn't a feeling — it's a math problem. And most freelancers get the math wrong, which is why studies consistently show that 30-50% of freelancers undercharge for their work.
In this guide, we're going to walk through the exact formula for calculating your freelance rate, including all the hidden costs that most people forget about. By the end, you'll have a specific number — not a vague range.
Why "Salary ÷ 2,080" Is Wrong
The most common mistake freelancers make is taking their desired salary and dividing it by 2,080 (the number of working hours in a year at 40 hours per week). If you want to make $85,000 a year, that gives you roughly $41 per hour.
This number is dangerously low. Here's what it doesn't account for:
- Self-employment tax (15.3%) — As a W-2 employee, your employer pays half of Social Security and Medicare. As a freelancer, you pay both halves. On $85K, that's about $13,000 in extra taxes.
- Health insurance — The average individual marketplace plan costs $456/month, or roughly $5,500–$8,000 per year.
- Retirement savings — No employer 401(k) match. You need to fund your own retirement, typically $5,000–$10,000 per year.
- Paid time off — Employees get 2-4 weeks of paid vacation. When you take a week off as a freelancer, you earn $0.
- Unbillable hours — You won't bill 40 hours a week. Between client acquisition, invoicing, admin, and marketing, most freelancers bill 25–30 hours per week.
- Business expenses — Software, equipment, accounting, internet, coworking space, professional development.
When you add all of these up, that $41/hour rate actually leaves you taking home closer to $50,000–$55,000 — not the $85,000 you planned for.
The Real Freelance Rate Formula
Here's the formula that actually works:
÷ Annual Billable Hours
= Your Minimum Hourly Rate
Let's break down each component.
1. Target Salary (Your Take-Home Goal)
Start with what you want to actually deposit into your bank account after everything is paid. Not gross income — net income. The number you'd accept on a job offer. For this example, we'll use $85,000.
2. Self-Employment Tax
The self-employment tax rate is 15.3% (12.4% Social Security + 2.9% Medicare). This is calculated on 92.35% of your net earnings. On $85,000 of income, you'd owe approximately $12,000–$13,000 in self-employment tax alone.
3. Federal Income Tax
You still owe regular income tax on top of self-employment tax. For a single filer making $85K, you're looking at roughly $12,000–$15,000 in federal income tax (the exact amount depends on deductions).
4. Benefits You Need to Self-Fund
Add up the benefits your employer used to provide:
- Health insurance: ~$6,000–$8,000/year
- Retirement contributions: ~$5,000–$10,000/year
- Disability/life insurance: ~$1,000–$2,000/year (optional but smart)
5. Business Expenses
Every freelancer has overhead:
- Software and tools: $100–$300/month
- Accounting/bookkeeping: $100–$200/month
- Internet, phone: $100–$200/month
- Professional development: $500–$2,000/year
- Equipment depreciation: $500–$1,500/year
6. Profit Margin
Smart freelancers build in 10–20% on top for slow months, unexpected expenses, and business growth. This isn't greed — it's survival. Every business has a profit margin, and you're a business.
7. Annual Billable Hours
This is where most people get it wrong. You do NOT have 2,080 billable hours per year. Here's realistic math:
- 52 weeks minus 3 weeks vacation = 49 working weeks
- 49 weeks × 30 billable hours per week = 1,470 billable hours
That's 30% fewer hours than the naive 2,080 estimate.
A Real-World Example
Let's put this all together for someone who wants to take home $85,000:
| Line Item | Amount |
|---|---|
| Target take-home pay | $85,000 |
| Self-employment tax | $19,500 |
| Federal income tax | $18,700 |
| Health insurance | $7,200 |
| Retirement savings | $6,000 |
| Software & tools | $2,400 |
| Other business expenses | $3,000 |
| Profit margin (15%) | $21,300 |
| Total needed | $163,100 |
| ÷ Billable hours (1,470) | $111/hour |
See the difference? The naive calculation gave us $41/hour. The real number is $111/hour — nearly three times higher. That's not inflated; that's what it actually costs to be a freelancer who takes home $85K.
Key takeaway: If you're charging $40–50/hour and wondering why you feel broke despite working constantly, this is why. You're subsidizing your clients' projects with money that should be going to your taxes, health insurance, and retirement.
Freelance Rates by Industry (2026 Benchmarks)
While your rate should be based on YOUR numbers (not someone else's), it helps to see where the market sits. Here are typical ranges for experienced freelancers in the US:
| Industry | Hourly Range |
|---|---|
| Web Development | $75–$200+ |
| Mobile App Development | $100–$250+ |
| UX/UI Design | $80–$175 |
| Graphic Design | $50–$125 |
| Copywriting | $60–$150 |
| Video Production | $75–$200 |
| Marketing / Strategy | $100–$250 |
| Accounting / Bookkeeping | $60–$125 |
| Photography | $75–$250 |
| Consulting (General) | $100–$300+ |
If your calculated rate falls within or above these ranges, you're in the right ballpark. If it's below, either your expenses are very low or you may need to reconsider your target income.
How to Transition to Higher Rates
If you've been undercharging, you can't triple your rate overnight with existing clients. Here's a practical approach:
For new clients: Quote your real rate from day one. No discounts, no "introductory pricing." You'll be surprised — most clients don't blink at rates that seem high to you, because they're comparing you to agencies that charge 2–3x more.
For existing clients: Give 60–90 days notice of a rate increase. Frame it around the value you provide, not your expenses. "Based on the results I've delivered and current market rates, my rate will increase to $X effective [date]." Some will leave. That's okay — they're making room for clients who value your work properly.
Switch to project pricing: Once you know your hourly floor, estimate how many hours a project will take, add a 20% buffer, and quote a flat project rate. This rewards your efficiency and removes the "time = money" ceiling.
Calculate Your Exact Rate
Stop guessing. Our free calculator does all the math — taxes, benefits, expenses, and billable hours — and gives you your real number in seconds.
Open the Calculator →Common Mistakes to Avoid
Competing on price. If you're the cheapest option, you'll attract clients who value price over quality. These clients are the hardest to work with and the most likely to churn. Race to the bottom and you'll get there.
Forgetting quarterly taxes. The IRS expects freelancers to pay estimated taxes four times a year (April 15, June 15, September 15, January 15). If you don't, you'll face penalties — and a devastating tax bill in April. Set aside 25–30% of every payment in a separate savings account.
Not tracking your hours. If you don't know how many hours you actually bill per week, you can't calculate your real rate. Track everything for at least a month to get an honest baseline.
Discounting for "exposure" or "portfolio pieces." If your portfolio isn't strong enough to command real rates, the solution is personal projects and spec work on your own terms — not giving away professional work for free.
The Bottom Line
Your freelance rate isn't arbitrary, and it isn't about what you think you "deserve." It's a function of your financial reality: what it costs to live, what it costs to run your business, and what it costs to have a sustainable career instead of a burnout spiral.
Do the math. Charge accordingly. And stop apologizing for it.