The formula behind the rate
The calculator first grosses up your desired take-home pay for tax: take-home divided by one minus your tax rate. It then adds your annual business expenses to get the gross revenue you need. Next it works out your billable hours: working hours per week, multiplied by the weeks you work, multiplied by the share of time you can actually bill. Gross revenue divided by billable hours is your hourly rate.
The billable share is the number people underestimate. Sales, emails, invoicing, learning and revisions are real work that clients do not pay for hour by hour. Many freelancers find that only about half to two-thirds of their working time is billable, so the default is 60%.
Example
Suppose you want to take home $60,000, expect $6,000 of expenses and a 25% tax rate. Gross revenue needed is $60,000 divided by 0.75, plus $6,000, which is $86,000. Working 40 hours a week for 48 weeks at 60% billable gives 1,152 billable hours. Your rate is about $74.65 per hour.
Using the number
Treat the result as a floor, not a price. Market rates, your experience, the value of the work and your pipeline all affect what you can charge. If the calculated rate feels out of reach, you can change one lever at a time: raise billable share by cutting unpaid work, lower expenses, or accept a smaller take-home target while you build up. For fixed-price work, move on to the project pricing calculator.
Worked example: $60,000 take-home
Say you want $60,000 of take-home pay, expect $6,000 of business expenses, set aside 25% for tax, work 40 hours a week for 48 weeks, and can bill 60% of that time. You need about $86,000 of gross revenue and have 1,152 billable hours, so your minimum rate is about $74.65 per hour, or about $597 per day.
If you could bill 80% of your time instead, the same goal needs only about $56 per hour. This is why raising your billable share, through better systems and repeat clients, can matter as much as raising your rate.