"Just divide your target salary by 2,080 hours" is the kind of shortcut that quietly leaves out everything that makes freelancing different from employment — no employer covering half your payroll tax, no paid vacation, and real hours every week that go to admin instead of billable client work.
What Goes Into the Real Number
- Target net income — what you actually want to take home after tax
- Annual business expenses — software, equipment, insurance, anything an employer would normally provide
- Effective tax rate — your own combined income tax + self-employment tax estimate
- Weeks off per year — vacation, sick days, holidays
- Billable percentage — the share of working hours actually billed to clients, not spent on admin or marketing
A Worked Example
Target net income of $5,000/month ($60,000/year), $6,000 in annual business expenses, a 30% effective tax rate, 4 weeks off, 40-hour weeks, and 70% billable time:
- Billable hours per year = 1,344
- Required gross revenue = $91,714.29
- Required hourly rate = $68.24
Checking the math in reverse: at $68.24/hour across 1,344 billable hours, minus expenses and tax, the actual net take-home works out to exactly $60,000 — the target reached precisely.
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