Turn your desired take-home income, expenses, and tax reserve into a defensible hourly and day rate, accounting for time off and realistic billable utilization.
Use this when setting your freelance rates for the first time, or when reviewing them annually, to make sure your rate actually supports your income goal after taxes, expenses, time off, and realistic billable hours.
Unlike a simple “divide desired salary by 2,080 hours” approach used by many freelancers, this calculator builds in a tax reserve, unpaid weeks off, and realistic billable utilization, producing a rate much closer to what you will actually need to earn.
Required gross revenue grosses up your target take-home income plus business expenses to cover your tax/self-employment reserve percentage.
Available billable hours come from your working weeks per year (52 minus weeks off) multiplied by hours per week, then reduced by your realistic billable utilization percentage.
Your hourly rate is required gross revenue divided by billable hours, and your day rate simply multiplies that hourly rate by your chosen hours per working day.
Freelancers spend real time on admin, invoicing, marketing, proposals, and finding new clients — none of which is billable. Even a busy freelancer rarely bills more than 60–70% of their working hours; planning for 100% utilization will leave you short of your income goal.
As a freelancer you are responsible for both income tax and self-employment tax, with no employer withholding it for you. Reserving roughly a quarter to a third of gross revenue for taxes before you spend it avoids a painful surprise at tax time.
Hourly rates suit smaller, open-ended, or hard-to-scope work where the client wants to pay only for time used. Day rates suit larger blocks of dedicated work and are often easier for clients to budget against.
Input
$80,000 target take-home, $8,000 expenses, 28% tax reserve, 4 weeks off, 40 hrs/week, 65% billable utilization, 8-hour day.
Output
Required gross revenue: $122,222. Hourly rate: $97.94. Day rate: $783.52.
Grossing up $88,000 (income + expenses) for a 28% tax reserve requires $122,222 in revenue. Across 48 working weeks at 40 hrs/week, only 65% (1,248 hours) is billable, so the hourly rate needed is $97.94, or $783.52 for an 8-hour day.
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