How to Set Your Freelance Rate to Hit a Take-Home Goal

A common way new freelancers set their rate: take their old salary, divide by 2,080 (40 hours × 52 weeks), and call it their hourly rate. This dramatically undercharges, because it ignores three things a salary already had baked in: taxes, benefits, and the fact that not every working hour is billable.

Working backward from a take-home goal

1. Start with your desired annual take-home pay — what you actually want to land in your pocket after taxes.
2. Gross it up for taxes — using your expected tax set-aside percentage, back into the pre-tax income needed to net your take-home goal.
3. Add business expenses — software, insurance, equipment — as costs the business needs to cover on top of your pay.
4. Divide by billable hours, not total hours — accounting for the reality that admin, marketing, and unpaid proposals eat into total working time.

Billable hours are lower than you think

Many freelancers discover only 60-80% of their working hours are actually billable once non-client work is subtracted — invoicing, marketing, professional development, and time spent on proposals that don't convert. A rate calculated against 40 billable hours a week, when you're realistically billing 25-30, will fall well short of the take-home goal it was meant to hit.

A simplified worked example

Target take-home: $70,000. Assume a 28% tax set-aside, requiring roughly $97,000 in pre-tax income. Add $8,000 in annual business expenses (software, insurance, equipment): $105,000 needed in gross revenue. At 1,500 realistic billable hours per year (about 30 billable hours/week accounting for non-billable time), that's roughly $70/hour — notably higher than a naive salary-divided-by-2,080 calculation would suggest.

Frequently asked questions