Question 1

How do I calculate my hourly rate as a freelancer?

Accepted Answer

Start with the take-home you want to make in a year, divide by (1 − your effective tax rate) to get the gross revenue you need, then divide that by the billable hours you actually have available. Example: $100K take-home ÷ 0.70 (after a 30% combined SE+federal+state tax rate) = $142,857 gross. With 4 weeks vacation, 1 sick, 2 holidays, and 1 admin week, you have 44 working weeks. At a realistic 25 billable hours per week, that's 1,100 billable hours. $142,857 ÷ 1,100 ≈ $130/hour. The mistake most freelancers make is starting from a desired hourly rate without first solving for the rate that hits their actual income target. Source: SBA — Manage Your Finances (sba.gov).

Question 2

What billable utilization rate should I expect?

Accepted Answer

60% is the realistic median for solo freelancers and consultants — meaning 24 of every 40 working hours are actually invoiced to clients. The remaining 40% goes to business development, proposal writing, admin, learning, and the unbilled overflow on every project. 70%+ utilization is achievable but requires deliberate process — productized services, retainers with scoped deliverables, or a partner / VA who handles non-billable work. Agencies often quote 80%+ but those numbers usually count only direct labor against direct contract hours and exclude principals, sales, and ops staff. If you're modeling a solo practice, anchor on 25 billable hrs/wk (62.5% utilization on a 40-hr week) — going higher in the spreadsheet creates a rate that's too low in reality. Source: U.S. Bureau of Labor Statistics — Professional Services (bls.gov).

Question 3

How much vacation should I budget into my rate?

Accepted Answer

At minimum, 4 weeks of vacation, 1 week of sick / personal time, 2 weeks of federal holidays, and 1 week of pure admin / business-development burst — totaling 8 weeks off in a 52-week year. That's the default this calculator uses because it matches the W-2 white-collar baseline that solo operators are competing against on lifestyle. Many freelancers price as if they'll work 50 weeks, then in practice take 8+ weeks off and end up underwater on income. The correct move is to bake the time off into the rate. Going lighter — 0 vacation, 0 sick — is not a sustainable plan; the burnout and forced unpaid breaks both cost more than budgeted rest.

Question 4

How do I price retainers vs hourly?

Accepted Answer

An hourly rate is the floor — the minimum you'd accept for one hour of effort. A retainer should be priced from the same hourly rate × estimated hours per month × 1.1 to 1.3 (a premium for the predictability and capacity reservation the client gets). If your hourly rate is $150 and a retainer client books 20 hours/month, the retainer price is $3,000 (1.0×) to $3,900 (1.3×) per month. Below 1.0× is leaving money on the table; above 1.3× and clients revert to hourly to manage cost. The deeper move is to drop hours entirely and price retainers on outcomes — but that's a separate skill (positioning + scoping) and most operators should solve hourly first.

Question 5

How should I think about non-billable time?

Accepted Answer

Every hour of business development, proposal writing, learning, and admin is paid for by the billable hours. If you have 25 billable hrs/wk and bill $150/hr, the $3,750/wk gross is funding all the unbilled hours too. Operators who fail to make this connection price billable hours like wages and end up working 60-hour weeks for a $75K take-home. The fix is structural: either raise the rate to reflect the full effort behind each billable hour, or shift to a retainer / productized model where the price is decoupled from hours. The 25 hr/wk default in this calculator already accounts for the non-billable load — don't model a higher number unless you have a specific staffing or process reason.

Question 6

What's a reasonable effective tax rate for a self-employed person?

Accepted Answer

30% is the working median for U.S. self-employed in the $100K–$150K bracket: ~15.3% self-employment tax (deductible at half), ~15-22% federal income tax, and 0-9% state income tax depending on residency. High-tax states (CA, NY, OR, NJ) at $200K+ push effective rates closer to 40%. No-income-tax states (FL, TX, WA, NV, TN) at the same income land closer to 25-27%. The number you want is the combined effective rate — total tax owed ÷ gross revenue minus deductible expenses — not the marginal rate. Get this from your prior-year Schedule C / Form 1040 if you've been self-employed; if not, 30% is the safer planning default than the 22% federal-only marginal rate that turns up in most online articles. Source: IRS Pub 535 — Business Expenses (irs.gov).

Question 7

Should I include health insurance and retirement in the rate?

Accepted Answer

Yes — every benefit a W-2 employer would pay for is now your line item, and it has to come out of gross revenue before take-home. Add the annual cost of health insurance (typically $7K-$15K for a self-funded individual / family plan in 2026), retirement contribution target ($7K to $69K depending on whether you're using a Roth IRA, SEP, Solo 401(k)), disability insurance ($1K-$3K), and any continuing-education or professional-certification spend to the 'annual business expenses' input. The calculator treats these as deductible business expenses for the gross-to-net build, which matches Schedule C semantics for the items that are deductible (health insurance premiums via the SE health insurance deduction; retirement contributions on the 1040 itself). The output is a rate that fully covers the benefits stack, not just the visible operating costs.

Question 8

When should I switch from hourly to project or retainer pricing?

Accepted Answer

Three signals: (1) you're consistently billing the same client 15+ hours/month — convert to a retainer with scoped deliverables and capture the predictability premium; (2) you've delivered the same project type 3+ times — productize it with a fixed scope and price, and stop selling time; (3) the value the client gets is materially decoupled from your hours — a $50K outcome from 30 hours of work shouldn't be priced at $1,500. The cleanest progression is hourly → fixed-fee project → retainer → productized service → equity / outcome share. Most service operators stop at hourly because it's the easiest to price; the next two moves are usually where the income jumps. Source: SBA — Manage Your Finances (sba.gov).

Hourly rate	Projected take-home
$50 / hr	$38,500
$75 / hr	$57,750
$100 / hr	$77,000
$125 / hr	$96,250
$150 / hr	$115,500
$200 / hr	$154,000
$250 / hr	$192,500
$300 / hr	$231,000

Retainer + Hourly Rate Calculator

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