Frequently Asked Questions
How do I calculate my freelance hourly rate?
Add your desired annual take-home income, annual business expenses, and estimated taxes, then divide by your total billable hours per year. Our calculator automates this with accurate state-specific tax estimates. A typical formula: (Income + Expenses + Taxes) ÷ Billable Hours = Hourly Rate.
What is self-employment tax?
Self-employment tax is 15.3% of your net self-employment income, covering Social Security (12.4%) and Medicare (2.9%). Unlike employees who split this with employers, freelancers pay the full amount. You can deduct half of SE tax from your adjusted gross income.
How many billable hours should I plan for?
Most freelancers can sustainably bill 25-35 hours per week, or 1,200-1,500 hours per year. The remaining time goes to non-billable work: marketing, admin, invoicing, client communication, and business development. New freelancers often overestimate—start conservative.
Which states have no income tax?
Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Freelancers in these states only pay federal taxes and self-employment tax, potentially saving thousands annually.
Should I charge hourly or per-project?
Both models have merits. Hourly works well for ongoing work and unclear scopes. Project-based rewards efficiency and can be more profitable. Many freelancers use hourly for maintenance/consulting and project rates for defined deliverables. See our detailed comparison.
How often should I raise my rates?
Review rates annually at minimum. Good times to raise: January (new year), after successful projects, when fully booked, or after gaining new skills. If you haven't raised rates in 2+ years, you've effectively taken a pay cut due to inflation.
What expenses should I factor into my rate?
Include: health insurance, software/tools, internet/phone, professional development, accounting/legal fees, business insurance, equipment, marketing, and retirement contributions. For most freelancers, business expenses run $10,000-25,000 annually.
How accurate are the tax estimates?
Our calculator uses 2025 federal tax brackets and state tax rates for estimates. However, actual taxes depend on deductions, credits, filing status, and other factors. These estimates help with planning but shouldn't replace professional tax advice.
What if my calculated rate seems too high?
If your rate exceeds market benchmarks, consider: (1) positioning yourself as a specialist to justify premium rates, (2) reducing expenses, (3) increasing billable hours, or (4) adjusting income expectations. Sometimes the math reveals that certain markets aren't viable for sustainable freelancing.
Can I use this calculator for non-US locations?
Yes! The calculator supports multiple currencies and you can disable auto tax calculation to enter your own tax rate. While state tax data is US-specific, the core methodology works globally. Simply select your currency and adjust the tax rate for your country.
Still Have Questions?
Try our calculator to see how different inputs affect your rate, or explore our educational guides.
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