Why freelance rates look "high"
The formula works backwards from take-home: required revenue = target income ÷ ((1 − overhead%) × (1 − tax%)), and rate = revenue ÷ billable hours. Example: to take home $80,000 with 15% overhead and a 25% tax reserve, you need $80,000 ÷ 0.6375 ≈ $125,500 of revenue. At 25 billable hours a week for 48 weeks (1,200 hours), that's about $105/hour — for the same take-home a $80k salaried employee gets at a "$31/hour" desk.
The billable-hours illusion
The most common freelance pricing mistake is dividing by 2,080 hours. A 40-hour freelance week might contain 20-25 billable hours — the rest disappears into proposals, invoicing, email, marketing, and learning. None of it is paid by a client, all of it is required to have clients. Price on the hours you can actually bill, and remember weeks off (vacation, sick days, dry spells between projects) produce zero revenue: 48 working weeks is optimistic, not lazy.
Rules of thumb for setting the number
Quick sanity check: (desired salary ÷ 1,000) ≈ minimum hourly rate — an $80k lifestyle needs at least ~$80/hour freelance. Or take the employee hourly equivalent and multiply by 1.5-2× to cover the employer-paid benefits and taxes you now fund yourself. When you quote the rate and nobody flinches, it's too low; most freelancers can raise rates on new clients well before demand actually drops.
How to use this calculator
Enter the take-home income you actually want to earn, your realistically billable hours per week (not the hours you sit at a desk), the weeks you'll take off, your overhead as a percentage of revenue, and a tax reserve percentage. The calculator works backward to the gross revenue you need and the minimum hourly rate that produces it, with a breakdown of where each dollar goes. Be honest about billable hours — 20-25 out of a 40-hour week is normal once you subtract marketing, admin, and unpaid proposals — because dividing by too many hours is exactly how freelancers underprice themselves. Treat the resulting rate as your floor: quote fixed project prices built on it, and raise it on new clients before demand ever softens.