Freelance Rate After Tax Calculator: The Hourly Number You Actually Keep
A $110 hour is rarely a $110 hour. This guide strips out overhead, self-employment tax and income tax — then reverses the formula so you can price from the net rate you want.
Updated August 29, 2026 · 11 min read
Freelance pricing strategist and founder of FreelancerMetrics. Ten years reading freelance P&Ls — first at an agency, now solo.
The formula: net rate = (gross rate − hourly overhead) × (1 − combined tax rate). Reversed: gross = (target net ÷ (1 − tax rate)) + overhead.
The rate you charge and the rate you keep are different jobs
Ask a freelancer what they earn and you get the gross hourly rate. It is the number on the contract, the number compared with peers, and the number used to decide whether a project is worth taking. It is also the number with the least connection to what ends up in a personal account at the end of the month.
Between the two sit three deductions that never applied in employment. Overhead, because you now buy your own software, insurance and hardware. Self-employment tax, because the half your employer used to pay invisibly is now yours as well. And income tax, which is due on profit and which nobody withholds on your behalf. Together they routinely take forty-five percent of a gross rate before it becomes spendable.
This guide runs the calculation in both directions. Forwards, so you can see what your current rate genuinely pays per hour. Backwards, so you can start from the net hourly figure your life requires and derive the gross rate that delivers it — which is the only version of this exercise that ever changes a price.
How to calculate your after-tax hourly rate in 5 steps
- 01
Start from your gross hourly rate
The advertised number, before anything is taken out. This is the figure clients agree to and the only one most freelancers ever compare with each other, which is precisely why so many quoted rates that sound competitive turn out to be worse than a salaried equivalent.
- 02
Remove overhead per billable hour
Divide your annual business costs by realistic billable hours and subtract that from the gross rate. At a $14,000 cost base over 1,200 hours, roughly $12 of every hour is gone before tax is even considered. Overhead comes out first because tax is calculated on profit, not revenue.
- 03
Apply self-employment tax to net earnings
US self-employment tax is 15.3% applied to 92.35% of net earnings — an effective 14.13% of profit — covering Social Security and Medicare. This is the layer that surprises people who left employment, because an employer previously paid half of it on their behalf without it ever appearing on a payslip.
- 04
Apply income tax at your marginal bracket
Income tax applies to profit after the deductible half of self-employment tax. Use your marginal rate rather than an average, because the extra hour you are pricing is taxed at the top of your range, not the middle. Add state tax where applicable.
- 05
Work backwards from the net rate you want
Gross rate = (target net rate ÷ (1 − combined tax rate)) + hourly overhead. This is the direction that actually changes behaviour: decide what an hour must keep, then set the price that delivers it, instead of discovering the shortfall a year later.
A worked after-tax rate calculation
A US freelancer at $110 an hour, a $14,000 annual cost base, 1,200 billable hours, the 22% federal bracket and 5% state tax. The last line reverses the formula for a $75 net target.
| Line | Amount | Notes |
|---|---|---|
| Gross hourly rate | $110.00 | The rate on the contract |
| Hourly overhead | −$11.67 | $14,000 costs ÷ 1,200 billable hours |
| Taxable profit per hour | $98.33 | Revenue minus business costs |
| Self-employment tax at 14.13% | −$13.89 | 15.3% of 92.35% of profit |
| Federal income tax at 22% | −$20.10 | After the deductible SE-tax half |
| State tax at 5% | −$4.92 | Varies widely; zero in some states |
| Net hourly rate | $59.42 | 54% of the advertised $110 |
| Gross needed for $75 net | $135.60 | Working the formula backwards |
Gross to net at different rate levels
Illustrative figures at a fixed $14,000 cost base with federal, self-employment and 5% state tax. Your bracket, state and cost base will shift these; the shape of the curve will not.
| Gross rate | Hourly overhead | Net rate | Kept | Notes |
|---|---|---|---|---|
| $60 | $6.42 | $46.83 | 78% | Below most US cost bases |
| $85 | $8.90 | $63.30 | 74% | Common early-career rate |
| $110 | $11.67 | $59.42 | 54% | With overhead and state tax |
| $150 | $11.67 | $83.15 | 55% | Overhead share falls as rate rises |
| $200 | $11.67 | $111.87 | 56% | Higher bracket offsets the gain |
| $275 | $11.67 | $150.40 | 55% | Entity choice starts to matter |
Eight signs your rate is not covering your tax bill
Each of these means the gross rate was set without knowing the net. Three or more and April is going to be an unpleasant month.
- !You compare your rate to salaried hourly pay without adjusting
- !Tax is a year-end surprise rather than a weekly transfer
- !Overhead has never been divided into an hourly figure
- !You use an average tax rate instead of your marginal one
- !Quarterly estimated payments are late or estimated loosely
- !State tax is left out of the calculation entirely
- !Rate rises are set by feel rather than by a net target
- !You cannot say what your last project paid you per hour after tax
Why the freelance-to-salary comparison misleads
A friend earning $60 an hour in employment is not earning $60 an hour in any sense you can copy. Their employer also pays half their payroll tax, their health cover, a retirement match, their equipment, their software, their training, and their paid leave. Depending on the sector, that package adds twenty-five to forty percent on top of the visible wage.
Matching a $60 salaried hour as a freelancer generally means charging $95 to $115 gross, and that is before allowing for the unpaid weeks a freelancer absorbs between projects. Rates that feel greedy in conversation are frequently just parity once the invisible employer contributions are added back.
This is worth knowing not as reassurance but as negotiation material. When a client compares your rate to a salaried equivalent, the honest answer is that the two numbers measure different things, and the comparison they are making omits everything their own HR department pays for.
Setting aside tax so the net rate is real
A net rate calculation is only meaningful if the tax genuinely leaves your account. The mechanism that works is dull and effective: a separate savings account, an automatic transfer of twenty-five to thirty percent of every payment on the day it clears, and quarterly estimated payments drawn from that account and nowhere else.
Freelancers who do this stop thinking about tax entirely between quarters, because the money was never available to spend. Freelancers who do not are effectively borrowing from the government at the worst possible time in the year, usually while also trying to fund a quiet January.
If your income varies a lot, recalculate the percentage each quarter against actual profit rather than assuming last year's rate. A strong quarter can push you into a higher marginal bracket, and a set-aside rate that was adequate in March can be short by September.
Raising the net rate without raising the price
There are three levers, and price is only one. The first is overhead: every dollar of unnecessary fixed cost removed goes straight into net pay, and unlike a price rise it requires no client conversation. The second is deductions — legitimate expenses that were never recorded are taxed money you should have kept, worth roughly thirty-five cents on the dollar at typical brackets.
The third is utilization. Overhead is fixed, so spreading it across more billable hours lowers the per-hour cost without changing anything a client sees. Moving from 1,000 to 1,200 billable hours on a $14,000 cost base cuts hourly overhead from $14 to under $12 — a raise that came from scheduling, not negotiation.
When those three are exhausted, the price rise is the remaining lever, and by then you will have an exact figure for how large it needs to be. That is a far easier conversation to have than a vague sense that you are probably worth more.
Frequently asked questions
What is a freelance rate after tax calculator?
It converts a gross hourly rate into what you actually keep, by removing hourly overhead, self-employment tax and income tax. It also runs in reverse: give it the net rate you want per hour and it returns the gross rate you have to charge to get there.
How do I calculate my hourly rate after tax?
Subtract hourly overhead from the gross rate to get profit per hour, apply self-employment tax at 15.3% on 92.35% of that profit, then apply your marginal income tax rate and any state tax to what remains. The order matters — tax applies to profit, not revenue.
How much of a freelance rate goes to tax?
For most US freelancers, thirty to forty percent of profit once self-employment tax, federal income tax and state tax are combined. Adding overhead on top, a $110 gross rate commonly nets somewhere between $55 and $65 an hour.
What is self-employment tax and why does it hit so hard?
It is the 15.3% covering Social Security and Medicare, applied to 92.35% of net earnings. In employment your employer paid half of it invisibly. As a freelancer you pay both halves, which is the single biggest reason a freelance rate has to exceed the equivalent salaried hourly pay.
What gross rate do I need for a $75 net hourly rate?
Around $135 to $140 at a combined 35% tax rate with $12 of hourly overhead. The formula is gross = (target net ÷ (1 − tax rate)) + hourly overhead. Run it with your own bracket and cost base rather than borrowing someone else's multiplier.
Should I subtract overhead before or after tax?
Before. Legitimate business expenses reduce taxable profit, so overhead comes out first and tax is calculated on what remains. Taxing the gross figure and then removing costs overstates your tax bill and understates your net rate.
How does this compare to a salaried hourly wage?
A salaried $60 an hour includes employer-paid taxes, insurance, retirement matching, paid leave and equipment. Matching it as a freelancer typically requires a gross rate of $95 to $115 — which is why rate comparisons against employed friends are almost always misleading.
Does an LLC or S-corp change my after-tax rate?
It can, once profit is high enough. An S-corp election lets you split income between salary and distributions, potentially reducing self-employment tax, but it adds payroll, filing and accounting costs. Somewhere around $80,000 to $100,000 of profit is where the maths usually starts to favour it — confirm with an accountant for your situation.
How much should I set aside from each payment?
Twenty-five to thirty percent of profit for most freelancers, moved to a separate account on the day the payment clears. If you are in a high-tax state or a higher bracket, thirty-five percent is safer. Quarterly estimated payments then come out of that account without touching operating cash.
Do deductions meaningfully change the net rate?
Yes. Every legitimate deduction reduces taxable profit, so at a combined 35% rate a $1,000 deduction is $350 kept. That is why unrecorded expenses are doubly expensive: you pay the cost and then you pay tax on money that should never have been taxable.
Why is my net percentage lower at higher rates?
Because income tax is progressive. Your overhead share falls as the rate rises, which helps, but the extra income is taxed at a higher marginal bracket, which offsets it. The net rate still rises in absolute dollars — just not proportionally.
Should I quote clients my gross or net rate?
Always quote gross — that is the price of the service. Net is an internal number for deciding whether the price is high enough. Confusing the two in a negotiation leads to explaining your tax situation to a client, which never improves the outcome.
Price from the rate you keep, not the rate you quote
Enter your target take-home, business costs and billable hours. The calculator returns the gross rate that survives overhead and tax intact.
Open the calculator →About the author
Freelance pricing strategist · Founder, FreelancerMetrics
Javed spent a decade setting rates on both sides of the table — first quoting projects inside a digital agency, then running an independent practice. He now builds pricing tools used by freelancers in over 40 countries, and every guide here is based on real quotes, invoices and negotiations rather than recycled advice.
- 10+ years pricing freelance and agency work
- Reviewed 400+ freelancer P&Ls and rate cards
- Builder of the FreelancerMetrics rate calculators
- Writes only from first-hand client and invoice data
Sources & methodology
Benchmarks in this guide come from public data and from anonymised rate and invoice figures shared by FreelancerMetrics users. Where a number is an estimate rather than a published statistic, it is labelled as such in the text. Primary references:
- 1Self-Employment Tax (Social Security and Medicare Taxes)IRS
The 15.3% combined rate and the 92.35% net-earnings basis used in our tax estimates.
- 2Self-Employed Individuals Tax CenterIRS
Self-employment tax rate, quarterly estimated payment rules and deductible business expenses.
- 3Financial reporting and profitability guidanceAICPA & CIMA
Standard gross-margin and net-profit definitions used in our profit calculations.
- 4Employer Costs for Employee CompensationU.S. Bureau of Labor Statistics
Benefits as a share of total compensation — the gap freelancers must self-fund.
Last reviewed August 4, 2026 by Javed Niamat. Tax and benefit figures are US-centric; check your local authority before filing.