How Much Should I Charge as a Freelancer?
The short answer
If your last job paid $50 an hour, charging $50 as a freelancer quietly bankrupts you: the rate also has to cover both halves of payroll tax, your own benefits, and the hours you cannot bill. Run the 5-step formula on the same salary and it comes out at about $95 an hour.
How much should I charge as a freelancer? If your last job paid $50 an hour, the instinct is to charge $50 an hour. That instinct will quietly bankrupt you.
Updated September 2026. Educational information, not financial or tax advice.
Here is the short answer: a $50-an-hour salary is really about $95 an hour in freelance rates. Not because freelancers are greedy. Because a salary hides three costs, taxes you now pay yourself, benefits you now buy yourself, and hours you work but cannot bill, and your rate has to cover all three, plus a profit margin.
The formula below walks through each one with real numbers. Every assumption is stated, so you can swap in your own figures.
What is the 5-step freelance rate formula?
- Annual salary equivalent. Multiply the hourly wage you are replacing by 2,080 (40 hours × 52 weeks). $50/hr becomes $104,000 a year.
- Set your take-home target. An employee loses part of that to income tax plus 7.65% FICA before it ever hits the bank. Figure out the take-home number you are actually trying to match.
- Gross up for self-employment tax. Freelancers pay both halves of Social Security and Medicare: 15.3% on 92.35% of profit, about 14.1% effective, versus 7.65% as an employee. Half of it is deductible from income, which softens the blow but does not remove it. (IRS)
- Add benefits replacement. Health insurance, retirement savings, paid time off, all on you now. The Bureau of Labor Statistics puts employer benefit costs at 29.8% of total compensation for private-industry workers. You will not replicate every line of that, but the big two alone run into five figures a year. (BLS)
- Divide by billable hours, not 2,080, then add profit. A business that prices at cost is a hobby with invoices. Ten to twenty percent margin is the buffer that covers dry months.
How much should I charge as a freelancer: what does the $50-to-$95 worked example show?
Here is the full walk-through. The assumptions are illustrative and stated up front: you want to match a $50/hr salary ($104,000/yr). The employee loses a combined ~28% to income tax and 7.65% FICA. The freelancer faces ~20% effective income tax plus 14.13% self-employment tax (15.3% × 92.35%). Benefits replacement is a $6,000 individual health plan plus $9,500 in retirement savings. Billable hours are 26 a week × 52 weeks = 1,352, which is 65% utilization, the rest goes to admin, marketing, proposals, and downtime.
- Salary to replace: $50 × 2,080 = $104,000
- Take-home target: $104,000 × (1 − 0.28) = $74,880
- Gross up for freelancer taxes: 20% + 14.13% = 34.13%, so $74,880 ÷ (1 − 0.3413) = $113,674
- Benefits replacement: $113,674 + $6,000 + $9,500 = $129,174
- Hourly rate: $129,174 ÷ 1,352 billable hours = $95.54/hr
About $95 an hour. The $50 salary did not double because of greed. It nearly doubled because of math: fewer billable hours, both halves of payroll tax, and benefits you fund yourself.
Notice how much damage the billable-hours step does on its own. Even the naive version stings: $104,000 ÷ 1,352 = $76.92/hr. You cannot bill every hour you work, so the salary number is already wrong before taxes enter the picture.
And time off is not free, it is priced into the rate or it comes out of your savings. Those 1,352 hours assume you bill 26 hours every single week of the year. Take four unpaid weeks off and you are down to 1,248 billable hours, which pushes the same $129,174 target to $103.51/hr.
| Step | The math |
|---|---|
| Step 1: salary to replace | $50 x 2,080 = $104,000 |
| Step 2: take-home target | $104,000 x (1 - 0.28) = $74,880 |
| Step 3: grossed up for freelancer taxes | $74,880 / (1 - 0.3413) = $113,674 |
| Step 4: plus benefits replacement | $113,674 + $6,000 + $9,500 = $129,174 |
| Step 5: hourly rate on 1,352 billable hours | $129,174 / 1,352 = $95.54 an hour |
Why do most freelancers undercharge: the three leaks?
Leak 1: non-billable hours. Proposals, invoicing, email, chasing late payments, learning new tools, none of it bills. New freelancers often assume 80% utilization or better; 50 to 65% is realistic in year one. Every unbillable hour raises the rate the billable ones must carry.
Leak 2: the second half of payroll tax. As an employee, 7.65% FICA disappears before you ever see it, and your employer matches it silently. As a freelancer, you pay the full 15.3% on 92.35% of profit, starting from the first $400 of net earnings. Half is deductible from your income, which helps at tax time but does not change what your rate must cover.
Leak 3: benefits. That 29.8% BLS figure covers paid leave, insurance, retirement, and legally required benefits. You will skip some lines, nobody buys themselves workers' comp, but health insurance and retirement alone justify a large markup on the salary number. Price them in or retire on vibes.
Should you price hourly or by the project?
Once you know your hourly floor, $95 in the example above, project pricing gets simple: estimate the hours honestly, multiply, then add 15 to 25% for revisions and scope creep. Never quote below the floor to win a client. A client who needs you at $60 an hour when your floor is $95 is paying you to go broke slowly.
Fixed pricing has one real advantage: efficiency gains are yours to keep. Finish a 10-hour project in 7 and your effective rate rises. Hourly billing punishes speed. Either way, the floor is the floor.
How often should you revisit your rate?
Costs move. Health premiums rise, tax brackets shift, and your skills get sharper. Re-run the formula once a year, and add the profit margin on purpose, not as an afterthought. Ten percent on $129,174 is about $12,900: the buffer for dry months, new equipment, and the reality that freelance income arrives in lumps. A rate with no margin is a rate with no future.
If you would rather not rebuild the spreadsheet yourself, the Freelancer Rate Calculator (US) runs this whole formula with your own numbers, salary target, billable hours, tax rates, and benefits, and shows the rate instantly.
Setting the rate is only half the job. The IRS also wants its cut four times a year, so read the freelancer quarterly taxes guide before your first estimated payment. And if you are still deciding between freelancing and a second W-2 job, run the real math on a second paycheck first, the comparison is closer than it looks.
FAQ
How much should I charge as a freelancer? About $95 an hour if you're replacing a $50-an-hour salary. A salary hides three costs your rate must cover: taxes you now pay yourself, benefits you now buy yourself, and hours you work but cannot bill, plus a 10 to 20 percent profit margin. The article walks through the full worked example with its assumptions stated.
What is the 5-step freelance rate formula? Multiply your target hourly wage by 2,080 to get the annual salary equivalent. Set the take-home number you're actually matching. Gross up for self-employment tax, 15.3% on 92.35% of profit, about 14.1% effective. Add benefits replacement: BLS puts employer benefit costs at 29.8% of compensation. Finally, divide by billable hours, not 2,080, then add profit.
Why do most freelancers undercharge? Three leaks. First, non-billable hours: proposals, invoicing, admin, 50 to 65% utilization is realistic in year one, not 80%. Second, the second half of payroll tax: freelancers pay the full 15.3% self-employment tax versus 7.65% FICA as an employee. Third, benefits: health insurance and retirement alone run into five figures a year, yet most price none of it in.
How does a $50 salary become a $95 freelance rate? The worked example starts at $104,000, targets $74,880 take-home, and grosses up for freelancer taxes to $113,674. Add a $6,000 health plan and $9,500 in retirement savings to reach $129,174. Divide by 1,352 billable hours (26 a week, 65% utilization) and the result is $95.54 an hour. Take four unpaid weeks off and the same target pushes to $103.51.
Should I quote hourly or project pricing? Once you know your hourly floor, $95 in the example, project pricing gets simple: estimate hours, multiply, then add 15 to 25 percent for revisions and scope creep. Never quote below the floor: a client who needs you at $60 when your floor is $95 is paying you to go broke slowly. Fixed pricing keeps efficiency gains yours.
Sources
Each source below was opened and verified on September 25, 2026:
- Internal Revenue Service, "Understanding Taxes, Tax Tutorial: Payroll Taxes and Federal Income Tax Withholding" (https://apps.irs.gov/app/understandingTaxes/hows/tax_tutorials/mod14/tt_mod14_08.jsp), the 15.3% self-employment tax rate (12.4% Social Security + 2.9% Medicare), the 92.35% factor, the $400 net-earnings threshold, the one-half deduction from income, and the pay-as-you-go requirement.
- Internal Revenue Service, "FAQs: Estimated Tax for Individuals" (https://www.irs.gov/faqs/estimated-tax/individuals), the $1,000 threshold that triggers quarterly payments and the pay-as-you-go rule for self-employment income.
- U.S. Bureau of Labor Statistics, "Employee benefits cost employers $13.58 per hour for private industry workers in June 2025" (September 24, 2025) (https://www.bls.gov/opub/ted/2025/employee-benefits-cost-employers-13-58-per-hour-for-private-industry-workers-in-june-2025.htm), benefit costs of $13.58 per hour against $45.65 total compensation (29.8%) for private-industry workers, June 2025.
About Kollaz, Kollaz makes smart financial tools for modern money. This article's companion is the Freelancer Rate Calculator (US) spreadsheet, plug in your salary target, billable hours, and tax rates, and it computes the hourly rate that actually covers everything.