Free browser tool
Hourly rate calculator
An hourly charge has to support more than the time spent doing client work. Start with the annual income you want to keep, add your business costs and allow for a tax set-aside you choose. Then spread that revenue target over the hours you expect to bill, with admin and other nonbillable time shown alongside.
Your hourly target
Enter your income target, costs, working time and tax assumption to see a rate.
The formulas
Annual billable hours = billable hours per week × weeks worked.
Income before tax set-aside = take-home target ÷ (1 − set-aside percentage ÷ 100).
Annual revenue = business costs + income before tax set-aside.
Hourly rate = annual revenue ÷ annual billable hours.
Nonbillable hours = (total work hours − billable hours) × weeks worked. Only billable hours generate revenue in this model; total working hours are shown for comparison.
How it works.
- Enter your annual take-home target and annual business costs separately. Include software, equipment, insurance and other overhead relevant to your work, without counting your personal income twice.
- Estimate the hours you can actually bill in a working week. Enter total work hours too, including proposals, travel, bookkeeping and unpaid revisions, then the weeks you plan to work.
- Supply your own tax set-aside percentage. The model applies it to income after the business costs you entered; it does not calculate your actual tax liability. Use the IRS source and a qualified tax professional to choose an appropriate assumption.
- Compare the hourly target, annual revenue and billable hours with the demand you expect. Review your actual costs and capacity before quoting. This tool works without an account and keeps your entries only in this page.
Sources.
Useful answers.
Why does the calculator ask for total work hours?
Total work hours make the time commitment visible. Billable hours generate the revenue in this model; sales, admin and other nonbillable hours still take part of your week. The rate is calculated from billable hours, while the result shows both totals.
Does this choose a tax percentage for me?
No. You enter the set-aside yourself. The IRS self-employed tax center explains self-employment tax, income tax and estimated payments. A qualified tax professional can help you choose an assumption for your circumstances; the model is a planning calculation rather than a tax return.
Should I include vacation and quiet weeks?
Reduce weeks worked for planned time away, and use realistic billable hours for time when work may be lighter. If demand changes sharply across the year, compare separate scenarios rather than treating your busiest week as typical.
Is the result the price I must charge?
It is the rate required by the targets and assumptions you entered. Clients, scope, competition and the value of the work still affect a quote. If the rate does not fit your market, review costs, billable capacity and your income target rather than assuming every working hour can be sold.
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