--- title: "How to Set a Freelance Hourly Rate That Covers Everything" description: "Work out a freelance rate from the income you want, business costs, taxes and the hours you can really bill, with a worked example and common traps." url: "https://mcc-solutionsnj.com/bookkeeping/guides/how-to-set-a-freelance-hourly-rate" --- Bookkeeping guide · Updated October 23, 2026 # How to Set a Freelance Hourly Rate That Covers Everything Many new freelancers take a salary they would like, divide it by 2,080 working hours, and wonder why they feel underpaid. The mistake is treating every hour as billable. This guide builds a rate from the ground up so it covers your costs, your taxes and your unpaid time. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** To set a freelance hourly rate, start with the take-home pay your household needs after business costs, remembering that an old salary hid costs an employer paid. Not every hour is billable, so dividing by 2,080 hours leaves you underpaid. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) · [Closing entries and retained earnings](/bookkeeping/guides/closing-entries-and-retained-earnings) · [Void vs delete a transaction](/bookkeeping/guides/voiding-vs-deleting-transactions) **Free tools:** [Contractor vs employee cost](/bookkeeping/contractor-vs-employee-cost-calculator) · [Price per unit calculator](/bookkeeping/price-per-unit-calculator) [Work out your rate with the freelance hourly rate calculator](/bookkeeping/freelance-hourly-rate-calculator) using your own numbers. [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Start with the income you want to keep Decide what you want to take home in a year. That is the number your household needs after business costs, not before. If you are replacing a job, remember that your old salary hid costs that an employer paid, such as part of payroll taxes, equipment, software and often health insurance. Write the target down as one annual number, then keep it separate from the expenses you will add next. ## Add business expenses List what the business costs to run each year: software, equipment, insurance, a workspace, professional fees, marketing and the accountant. Include things you buy once and use for years by spreading them out. This total is not income for you. It is money that goes out before you take anything home, so it must be recovered in your rate. ## Set aside for taxes, benefits and savings Freelancers pay their own self-employment taxes and income taxes, buy their own health coverage and fund their own retirement. Pick a set-aside percentage for these. A tax preparer can help you choose one that fits your situation, since it depends on income, location and filing status. Divide income plus expenses by one minus that percentage. With a 30% set-aside, you need to bill about 1.43 dollars for every dollar you want to keep or spend. ## Count only billable hours Subtract weeks for vacation, holidays and sick time. Then estimate how many hours a week you can actually bill. Finding clients, sending invoices, email, learning new tools and bookkeeping are real work, but nobody pays for them. Many freelancers find that 20 to 30 billable hours is a realistic week, even when they work much longer. Divide the revenue you need by billable hours a year. The result is your minimum hourly rate. ## A worked example Say you want to take home $70,000, expect $6,000 of business costs, and set aside 30% for taxes and benefits. You need to bring in $76,000 divided by 0.70, or about $108,600. You take four weeks off and can bill 25 hours in each of the other 48 weeks, which is 1,200 hours. Your minimum rate is about $90 an hour. If that number feels impossible for your market, the lesson is not to give up your costs. It is to raise billable hours, lower expenses or change what you sell. ## Reality checks Compare the number to what clients in your field pay, and add a cushion for slow months and late payers. If the rate looks too high for your market, you have three levers: cut expenses, raise billable hours by finding better clients, or move to project pricing where fast work earns more. Revisit the rate every year. Your costs and skills change, and a rate set once is usually out of date within a year or two. ## Common questions **Should I charge hourly or per project?** Both work. Hourly is simple when scope is unclear. Per-project pricing rewards you for being fast, as long as you set the scope carefully. Use your hourly rate to price the project. **How many billable hours should I assume?** Be conservative. Track your time for a few weeks to see how many hours you really bill, then use that number. **Do I need to charge sales tax?** It depends on what you sell and where your customers are. Check with your state tax agency or a tax preparer. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Wave Bookkeeping help for Wave users in New Jersey, and when it makes sense to outgrow Wave. Cleanup, reconciliation and moves to another platform. Wave →](/bookkeeping/software/wave) More guides - [Inventory Turnover Explained: Formula and Examples](/bookkeeping/guides/inventory-turnover-explained) - [How to Calculate Sales Commission: Flat and Tiered](/bookkeeping/guides/how-to-calculate-sales-commission) - [How to Calculate a Business Loan Payment and Interest](/bookkeeping/guides/how-to-calculate-a-business-loan-payment) - [How to Add or Remove Sales Tax From a Price](/bookkeeping/guides/how-to-add-or-remove-sales-tax-from-a-price) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Service Business Pricing and Quote Kit Price from your numbers, not your competitor's, and put every job in writing. [See what's inside ($19)](/toolkits/service-business-pricing-and-quote-kit) [Free sample](/toolkits/service-business-pricing-and-quote-kit#free-starter)14-day full refund Excel workbook ### Freelancer Income Tracker Record each payment and expense and see monthly net, a tax set-aside at the percentage you choose, and how much of your income comes from each client. [See what is inside ($19)](/toolkits/freelancer-income-tracker) [Try the free starter](/toolkits/freelancer-income-tracker#free-starter) Also in the [Freelancer Launch Bundle](/toolkits/freelancer-launch-bundle): 4 products for $89 instead of $126 separately. Tallyfinch ### Books you keep on your own computer Tallyfinch does invoices, bills, bank import, reconciliation and the main reports, in a file you own. $99 once, then $5 a month for updates; the app keeps working if you stop the plan. It does not do payroll or sales tax filing. The free download records up to 60 entries. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) [Download it free](/tools/pro/trial/mccBooks) [Compare the three apps](/software) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)