Your freelance rate is not your old salary divided by 2,080 hours. To set it properly, work backwards: start from the income you want to keep, add the taxes and benefits you now pay yourself, add your business costs, then divide by the hours you can actually bill — which is far fewer than 40 a week. The honest number is usually a lot higher than people expect.
2,080 is the number of hours in a full-time year (40 hours × 52 weeks). It's tempting to take a salary you'd be happy with, divide by 2,080, and call that your rate. The problem is that an employee's salary is only part of what a job actually costs an employer — and as a freelancer, you now carry all the rest yourself.
A salaried job quietly paid for your half of payroll taxes, often your health insurance, sometimes a retirement match, plus paid time off, equipment, and software. It also paid you for a lot of hours you weren't directly producing — meetings, training, slow afternoons. When you go independent, every one of those costs lands on you, and only the hours a client agrees to pay for bring in money.
A sustainable rate has to fund all of these, not just the first one:
1. Your take-home pay — the money you actually want in your pocket after tax.
2. Taxes — as a self-employed person you owe income tax plus self-employment tax (Social Security and Medicare), and you pay both the employer and employee halves. Set aside a realistic percentage.
3. Benefits you now self-fund — health insurance, retirement contributions, and anything else a job used to cover.
4. Business expenses — software, hardware, subscriptions, fees, a portion of your home office.
5. Unpaid time — admin, sales, invoicing, and email don't bill. Neither does time off. Your rate has to be earned in the billable hours that remain.
Instead of guessing a rate and hoping, build it up:
First, gross up your desired take-home for tax: pre-tax income = take-home ÷ (1 − your tax rate). Then add expenses and the benefits you self-fund to get the total revenue your business needs. Add a small profit cushion for slow months. Finally, divide that revenue by the number of hours you can genuinely bill in a year — not 2,080, but the realistic figure after unpaid work and time off.
| Take-home you want (after tax) | $70,000 |
| Grossed up at a 28% set-aside | $97,222 |
| + Business expenses | $4,000 |
| + Self-funded benefits (health, retirement) | $12,000 |
| + 10% profit cushion | $11,322 |
| = Revenue you need for the year | $124,544 |
| ÷ Billable hours (25/week × 48 weeks = 1,200) | ~$104 / hour |
Notice the gap: someone aiming for a $70,000 take-home — roughly a $97k "salary equivalent" before tax — needs to bill around $104 an hour, not the ~$47 you'd get from dividing $97k by 2,080. The difference is everything a job used to absorb.
The single biggest error is assuming you'll bill 40 hours a week. Almost no freelancer does. Between finding work, scoping, admin, invoicing, and the inevitable gaps between projects, 25 genuinely billable hours a week is a healthy target for many solo workers — and some bill fewer. The fewer hours you can bill, the higher each one has to be priced to hit the same income. That's why undercharging hurts most exactly when you're busiest with unpaid work.
If you want to keep the math — to save your numbers, compare scenarios, or price projects and retainers off the same model — the Freelance Pricing Toolkit ($29) is the spreadsheet version of these tools.
Note: tax figures here are general estimates, not tax advice. Confirm your actual rate with a qualified professional.