What is self-employment tax?

It is the Social Security and Medicare tax for people who work for themselves: 15.3% on 92.35% of net profit. Employees split this with their employer, but freelancers pay all of it, and half is deductible for income tax.

How many billable hours should I plan for?

Plan for 20 to 30 billable hours in a 40 hour week. The rest goes to finding clients, invoicing, email and skill building. New freelancers often bill fewer hours than they expect in the first year.

How do I convert a salary to a freelance rate?

Use Salary to hourly rate mode. A quick rule of thumb is to divide the salary by 1,000 and roughly double it, but the calculator gives a more accurate number from your own hours, expenses and tax rate.

Should I add a profit buffer to my rate?

A buffer of 10 to 20% helps cover slow months, late payments and price increases without dipping into savings. It also leaves room to negotiate without falling below the rate you actually need.

Freelance Hourly Rate to Salary Calculator

See what a freelance hourly rate really pays after expenses and self-employment tax, or find the rate you need to match a salary.

Hourly rate

Billable hours per week

Most freelancers bill 20 to 30 of 40 working hours.

Working weeks per year

After vacation, holidays and sick days.

Business expenses per year

Health insurance per year

Retirement savings per year

Estimated income tax rate

Estimated take-home per year

$40,347.84

$3,362.32 per month

Breakdown

Gross revenue: $60,000.00
Net profit: $54,000.00
Self-employment tax: $7,629.96
Income tax: $6,022.20

Compared with a full-time job

Naive salary (rate x 2,080 h): $104,000.00
Real effective hourly rate: $19.40

Where each dollar of revenue goes

Take-home $40,347.8467%
Taxes $13,652.1623%
Business expenses $6,000.0010%
Health and retirement $0.000%

Self-employment tax is 15.3% on 92.35% of net earnings: 12.4% Social Security up to the 2026 wage base of $184,500.00, plus 2.9% Medicare with no cap. Half of it reduces income subject to income tax.

How it works

In Hourly rate to income mode, enter your rate, billable hours per week and working weeks per year. Most freelancers bill 20 to 30 of their 40 working hours, because sales, admin and learning are unpaid.

Revenue minus business expenses is net profit. Self-employment tax is 15.3% on 92.35% of that profit (12.4% Social Security up to the annual wage base, plus 2.9% Medicare). Income tax uses your estimated rate on profit minus half the SE tax, then health insurance and retirement savings are subtracted.

In Salary to hourly rate mode, enter the take-home pay you want. The calculator grosses it up for a combined tax rate, adds expenses and an optional buffer, and divides by billable hours to give an hourly rate, a day rate and a monthly retainer.

Formula

revenue = rate × hours per week × weeks net profit = revenue - expenses SE tax = net profit × 0.9235 × 0.153 income tax = (net profit - SE tax ÷ 2) × tax rate required revenue = expenses + (take-home + health + retirement) ÷ (1 - tax rate) hourly rate = required revenue ÷ (hours per week × weeks)

Where:

0.9235: = Share of net profit subject to self-employment tax
0.153: = 12.4% Social Security (capped at the wage base) plus 2.9% Medicare
tax rate: = Your estimated income tax rate, or a combined rate in salary mode
2,080: = Hours in a full-time year (40 × 52), used for the naive salary

Worked example

At $50 an hour, 25 billable hours a week and 48 weeks, revenue is $60,000. Subtract $6,000 of expenses for a net profit of $54,000. Self-employment tax is 54,000 × 0.9235 × 0.153 = $7,629.96.

The naive full-time salary would be 50 × 2,080 = $104,000, far more than reality. Going the other way, $60,000 take-home with $6,000 expenses and a 25% combined tax rate needs $86,000 of revenue, which is $71.67 per hour or $573.33 per day.

Setting a Sustainable Freelance Rate

Start from what you need to live on, not from what others charge. Add up your target take-home pay, health insurance, retirement savings and business costs such as software, equipment, insurance and marketing. Then divide by realistic billable hours. This gives you a floor, and market research tells you how far above it you can price.

Review your rate at least once a year. Costs rise, skills grow and the Social Security wage base changes every year. Raising rates for new clients first, then for existing clients with a few weeks of notice, keeps relationships healthy while your income keeps pace.

Taxes and Cash Flow for the Self-Employed

US freelancers usually pay estimated taxes four times a year, because no employer is withholding from each check. Setting aside 25 to 30% of every payment in a separate savings account makes those quarterly deadlines far less stressful and avoids underpayment penalties.

Business expenses reduce both income tax and self-employment tax, so keep receipts and track them as you go. A home office, a laptop, professional software and health insurance premiums may all be deductible. Rules change, so treat this calculator as a planning estimate and confirm the details with an accountant.

Frequently asked questions

Rate times 2,080 assumes every working hour is billed and nothing is paid out. Freelancers bill only part of their week, take unpaid time off, cover their own expenses and pay both halves of Social Security and Medicare.

Related calculators

Work Hours CalculatorWeekly hours from your timesheet.Open

Investment CalculatorCompound growth with regular contributions.Open

Monthly Savings CalculatorReach a savings goal month by month.Open

US-based estimate for information only, not tax advice. Talk to an accountant about your situation.