Why is freelance tax so high?

As a freelancer, you pay 'Self-Employment Tax' (15.3%) which covers Social Security and Medicare. W-2 employees only pay half of this (the employer pays the other half). You are essentially paying both the employer and employee portion.

How many hours can I bill per week?

Very few freelancers bill 40 hours. You spend time on marketing, invoicing, and emails—which are unpaid. A realistic target is often 25-30 billable hours per week.

What expenses can I deduct?

You can generally deduct 'ordinary and necessary' business expenses: internet, home office portion of rent, software subscriptions, laptop, and office supplies. These deductions lower your taxable income.

Freelance Income Calculator | Hourly Rate to Salary | Finmato

The "$100/Hour" Illusion

New freelancers often make a fatal math error: they think $100/hour as a contractor equals a $200,000 salary ($100 x 2000 hours). In reality, after paying your own health insurance, covering the extra self-employment tax, buying your own laptop, and taking unpaid sick days, that $100/hour might feel more like $45/hour. Our Freelance Income Calculator reveals the harsh truth so you can price your services correctly.

The 3 Leaks in Freelance Pay

To earn a sustainable living, your rate must cover three things that 9-5 jobs provide for free:

Taxes

You owe an extra 7.65% tax compared to employees. You also have to pre-pay quarterly estimates.

Overhead

Software, subscriptions, accountants, and legal fees come out of your pocket, not corporate's budget.

Downtime

No paid vacation. No paid sick leave. If you don't work, you don't get paid. Your rate must be high enough to fund your time off.

How to Set Your Rate

A common rule of thumb is the "Rule of Thirds":

1/3 goes to Taxes.
1/3 goes to Business Expenses & Savings.
1/3 is your Take-Home Pay.

This means if you want to take home $5,000/month, you need to bill $15,000/month. Use our calculator to refine these numbers based on your specific situation.

Comparing Job Offers

Offered a full-time job at $80k vs a contract at $50/hr? The contract sounds higher ($100k gross), but after taxes and benefits, the job might actually pay more.

Project Pricing

Quoting a fixed price project? Estimate hours x Your Real Rate x 1.2 (buffer) to ensure you don't lose money on "scope creep."

Annual Planning

Set a revenue goal for the year. "I need to bill $150k to net $90k." Break that down into weekly targets.

Frequently Asked Questions

Should I form an LLC?

An LLC provides liability protection but doesn't necessarily save taxes by itself. However, electing "S-Corp" status as an LLC can save on self-employment taxes once you earn over roughly $80k net.

What is "Billable Utilization"?

It is the percentage of your work week spent on paid tasks. If you work 40 hours but only bill 20, your utilization is 50%. Top freelancers aim for 60-70%.

Do I charge VAT/Sales Tax?

In the US, most services are not subject to sales tax, but some states (like Hawaii, New Mexico, West Virginia) tax services. If you have international clients, VAT rules are complex.

Tax Estimate Disclaimer

This tool estimates taxes based on standard self-employment rules. It does not account for complex scenarios like QBI deductions, depreciation, or specific state/local taxes.

Data Privacy

We do not store your financial data. This calculator runs entirely in your browser.

Freelance Income Calculator

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