How much should I charge per hour as a freelancer?
Wanting $60,000 a year, the famous shortcut says charge $60 an hour (income ÷ 1,000). The honest calculation, with $5,000 of expenses, 25% taxes, and 20 billable hours a week, says $90.28. Most freelancers undercharge by 30–50% for exactly the reasons in that gap.
Quick-start rate finder · magic formula vs honest math · free, always
$60,000 income goal, 20 billable hrs/week =
$90.28 / hour, honestly
The shortcut says $60. The gap is taxes, expenses, and unbilled time.
$5,000 expenses · 25% effective tax · 960 billable hrs/yr
| Magic formula | Honest math | |
|---|---|---|
| Formula | income ÷ 1,000 | (income + expenses) ÷ (1 − tax) ÷ billable hrs |
| Numbers | $60,000 ÷ 1,000 | $65,000 ÷ 0.75 ÷ 960 |
| Rate | $60.00 | $90.28 |
Your numbers, your rate
Why the shortcut undercharges you
The income ÷ 1,000 shortcut bakes in three silent assumptions: 1,000 billable hours a year (20 hrs × 50 weeks), zero expenses, and zero taxes. Reality bills differently: at 20 billable hours a week for 48 working weeks you bill 960 hours; the software, insurance, and coworking cost $5,000; and roughly 25% of profit goes to income and self-employment taxes. Each correction pushes the rate up, and the three together push $60 to $90.28. The shortcut is a fine napkin estimate; it is a bad invoice.
The utilization reality
The largest of the three corrections is the one beginners miss: you bill 50–60% of your working hours, not 100%. The other half is proposals, admin, marketing, learning, and the gaps between clients. A 40-hour work week is 20 billable hours for a healthy practice, and 48 billable weeks a year (four weeks off, unpaid) is 960 hours. Quoting $60 an hour on those hours yields $57,600 of revenue, from which expenses and taxes still come out. Starting-rate realism: $25–$45 an hour is fine for your first clients while you build proof, then raise 10–20% with each new client until the math above is what you charge.
Estimates, not business or tax advice. Tax rates, expenses, and billable hours vary by field and location. Talk to a tax professional about your situation.
Common questions
How much should a freelancer charge per hour?
U.S. averages run roughly $10–$100+ with about $48 in the middle, but the right number is personal: (income + expenses) ÷ (1 − tax rate) ÷ billable hours. For a $60k income goal that is about $90/hr honestly vs $60 by the shortcut.
What is the magic freelance rate formula?
Annual income goal divided by 1,000. It assumes 1,000 billable hours, no expenses, and no taxes: a starting estimate, not a quote.
Why do freelancers undercharge?
They forget self-employment tax (~15.3% on top of income tax), business expenses, and that only half of working hours are billable. The three together explain a 30–50% gap.
How many billable hours should I assume per week?
About 50–60% of working hours: 20 billable hours in a 40-hour week is a healthy planning number.
How fast should I raise my rates?
A common working rule: raise 10–20% with each new client until the honest math is what you charge, starting from a beginner floor of $25–$45/hr.
Next from the ledger
Freelance rate to match your salary: start from your current salary instead
Beginner freelancer rates: what to charge when you are starting out
Salary to hourly calculator: what a salary is really worth per hour