Work backward from the income you want to the hourly and day rate you need to charge.
Enter your numbers to see the results.
Estimates only. This isn't financial or tax advice. The tax reserve is a single flat percentage you choose. Use the Self-Employment Tax Calculator to refine it.
Enter the take-home pay you want, your tax reserve, expenses, time off and billable hours to get the hourly and day rate that covers it all. Dividing an old salary by 2,080 leaves out the taxes an employer used to pay, your software and insurance, your vacations, and the hours spent on email, invoicing and finding the next client.
Few freelancers bill 100% of their working hours. Sales calls, proposals, admin, learning and gaps between projects all eat time. 60% is the default because it's a realistic starting point for many solo businesses, but track your own hours for a month and use the real figure. In the first example below, moving from 60% to 75% utilization drops the required rate from $86.96 to $69.57 an hour.
The calculator grosses up your take-home pay for taxes, adds your expenses and any margin, then divides by the hours you can actually bill.
25% tax reserve, $16,000 in expenses, 6 weeks off, 40-hour weeks, 60% billable. Pre-tax profit needed is $60,000 ÷ 0.75 = $80,000. Revenue needed is $96,000, or $8,000 a month. Billable hours are 46 × 40 × 0.6 = 1,104. Rate: $86.96 an hour, or $695.65 for an 8-hour day.
30% tax reserve, $24,000 expenses, 8 weeks off, 40 hours, 70% billable and a 10% buffer. Pre-tax profit needed is $128,571.43, and revenue $167,828.57 (about $13,985.71 a month). With 1,232 billable hours, the rate is $136.22 an hour, or about $1,089.80 a day.
20% tax reserve, $5,000 expenses, 4 weeks off, 30 hours a week, 50% billable. Revenue needed is $55,000 over 720 billable hours, so $76.39 an hour.
Notice that none of these rates is anywhere near "salary ÷ 2,080." $60,000 ÷ 2,080 is $28.85, but once taxes, expenses, time off and unbilled hours are counted, it takes about three times that.
Enough to cover your target take-home pay, taxes, business expenses and unpaid time. This calculator turns those into an hourly rate. A $60,000 take-home goal with typical costs can need around $87 an hour.
Don't just divide by 2,080. Use the salary as your take-home target, add a tax reserve and your expenses, and divide by billable hours, not total hours. The Salary to Hourly Calculator shows the plain conversion for comparison.
The percentage of your working hours you can charge to a client. The rest goes to admin, marketing and gaps between jobs.
It depends on your income, state and deductions. Self-employment tax alone is about 14.13% of profit below the Social Security wage base. Use the Self-Employment Tax Calculator to estimate that part, then add your income tax.
Multiply your hourly rate by 8, or by however many hours you consider a working day. At $86.96 an hour, that's $695.65 a day.
Usually, yes. As a contractor you pay both halves of Social Security and Medicare and cover your own benefits and time off, so the hourly rate needs to make up for that.