How this number is made
A freelance hour is not a W-2 hour. You pay both halves of payroll tax, you bill fewer hours than you work, and software, insurance, and unpaid admin are part of the rate. Start from the cash you want to keep, add expenses, gross it up for tax, then divide by hours you can actually invoice.
- Pick the take-home number, after tax, that would make the year acceptable.
- Add real business costs: tools, insurance, accounting, travel. Don’t hide them inside the hourly guess.
- Set a tax percent you will actually move to a separate account. Thirty is a common planning default, not your bracket.
- Count only billable hours. Twenty-five sold hours in a 40-hour week is normal once you include sales and admin.
Formula
Gross needed = (target take-home + expenses) ÷ (1 − tax rate). Hourly rate = gross ÷ (weeks × billable hours per week).
Worked example
Keeping $80,000 after a 30% set-aside, with $6,000 of expenses, means billing about $122,857. Over 46 weeks at 25 hours, that is about $107 an hour before you round up for scope risk.
Questions
Why not charge my old salary divided by 2,080?
A salary already excludes employer payroll tax, benefits, and the hours nobody bills. Dividing it by 2,080 prices you as if every hour were sold and someone else paid the overhead.
Should I publish this number?
Use it as a floor. Projects, rush work, and retainers can sit above it. Going below it means the year misses the target unless another client pays the difference.