How much should a freelancer charge per hour? (with worked examples)

"What's the average freelance hourly rate?" is the most-asked question by newer freelancers and the least useful. The average is wherever you decide to land - it depends on your skill, your market, your overhead, and your target income. The right question is: *what rate do I need to charge to hit my income target?*

Here's the formula working freelancers actually use, the math behind it, and three worked examples.

Why "average rates" mislead

A few problems with the "what's the going rate" approach:

• Averages hide a 10× range. Freelance designers charge anywhere from $25/hr to $250/hr. The average is meaningless if your skill or market puts you on the extreme end.
• You optimize for the wrong thing. Matching the average gets you average results. The point of going freelance is to escape the average.
• It ignores your costs. Two freelancers at the same rate can have wildly different take-home depending on their tax burden, health insurance, and overhead.

The right starting point is your target take-home income. Build the rate backward from there.

The formula

Hourly rate = (Target income + tax buffer + overhead) ÷ Billable hours per year

Three numbers go in. Let's break each one down.

1. Target income (your actual take-home)

What you want to keep after taxes and business expenses. Not gross revenue. Not "what I made at my last job." The number you'd report at a dinner party.

Pick this first. It's the only number you control.

2. Tax buffer

Freelancers in the US pay roughly:

• Federal income tax: 10-37% depending on bracket
• Self-employment tax: 15.3%
• State income tax: 0-13%

A solid working number for most freelancers is 30% of gross income going to taxes. Higher in CA/NY, lower in TX/FL.

3. Overhead

The cost of running your business that comes out of revenue, not your pocket:

• Health insurance ($300-1,000/month for solo coverage)
• Software ($100-300/month)
• Equipment depreciation ($1,000-3,000/year)
• Accountant ($500-2,000/year)
• Liability insurance ($200-500/year)
• Coworking or office space (if applicable)
• Internet, phone (business portion)
• Conferences, education

Add it up. For most service freelancers, overhead is $8,000-$15,000/year.

4. Billable hours

This is where most freelancers go wrong. A full-time freelancer does NOT bill 2,000 hours/year. You bill closer to 1,000-1,200.

Why:

• Vacation: 2-3 weeks (40-120 hrs lost)
• Sick days + buffer: 1 week (40 hrs lost)
• Admin: invoicing, accounting, follow-ups, taxes (200-300 hrs/year)
• Sales: pitching, calls, proposals (200-400 hrs/year)
• Marketing: content, social, networking (100-200 hrs/year)
• Unbilled discovery, scope discussions, revisions (100-300 hrs/year)

A realistic number is 1,000-1,200 billable hours/year. Some freelancers hit 1,400-1,500 with mature processes and steady retainer clients. Almost nobody hits 2,000.

Worked examples

$50,000 target take-home

• Target: $50,000
• Tax buffer (30%): $21,400
• Overhead: $10,000
• Gross needed: $81,400
• Billable hours: 1,000
• Hourly rate: $81/hr

$80,000 target take-home

• Target: $80,000
• Tax buffer (30%): $34,300
• Overhead: $12,000
• Gross needed: $126,300
• Billable hours: 1,100
• Hourly rate: $115/hr

$120,000 target take-home

• Target: $120,000
• Tax buffer (32% - higher bracket): $56,500
• Overhead: $15,000
• Gross needed: $191,500
• Billable hours: 1,200
• Hourly rate: $160/hr

If your current rate is below these numbers and you're hitting those income targets, you're either burning out (>1,200 hours/year) or under-counting taxes/overhead.

How to actually communicate the rate

Don't say "my rate is $115/hour." Two reasons: it anchors the conversation on hours not value, and it invites negotiation on rate rather than scope.

Better phrasings:

• "For projects this size, I typically work on a flat fee of $X. Want me to put together a proposal?"
• "I bill out at $115/hour for ongoing engagements, or flat fee for defined projects."

Flat fees compound your rate over time as you get faster at the same kind of work. Hourly rates lock you into a ceiling.

When to raise rates

A few signals it's time:

• You've been at the same rate for 12+ months.
• Your calendar is consistently full at the current rate.
• You're turning down work that doesn't pay enough.
• You've added a skill or specialization that wasn't there a year ago.

Raise rates on new clients first. Then renew existing clients at the new rate at their next contract cycle (usually annual). Don't surprise existing clients mid-engagement.

The tracking part

The math above only works if you actually know how many hours you're billing. Most freelancers underestimate non-billable time by 30-50%, which makes their effective rate much lower than they think.

Timely tracks billable and non-billable separately so you see your real effective hourly rate at the end of each month - not your wish rate but the one your calendar actually produced.

TL;DR

• Don't ask "what's the average rate." Build it backward from your target income.
• Formula: (income + 30% tax + ~$10K overhead) ÷ ~1,000 billable hours.
• $50K target → ~$81/hr. $80K target → ~$115/hr. $120K target → ~$160/hr.
• Communicate rate as flat fee when possible, hourly as a fallback.
• Track real billable hours - most freelancers under-count non-billable time.