Dividing your old salary by 2,080 hours is how freelancers undercharge by 40%+. Do the real math: taxes, expenses, and the hours you can actually bill.
The rest goes to proposals, admin, emails, marketing, and learning. 50-70% is realistic for most freelancers.
Most freelancers set their rate by dividing their old salary by 2,080 hours, which ignores taxes, expenses, and the hours you cannot bill. That is how you undercharge by 40% or more. This calculator does the full math instead. Enter your target annual income before tax, your yearly business expenses, and your tax set-aside using the presets of 25, 30, or 35 percent (30 is the default, and all presets are editable starting points, not tax advice). Then enter the hours you can actually bill: working weeks per year (48 is the default, accounting for time off and dry spells), hours worked per week, and the share of those hours that are billable (presets of 50, 60, or 70 percent; 60 is the default and 50 to 70 is realistic for most freelancers). The tool adds your target plus expenses plus the tax buffer, divides by your real billable hours, and shows your minimum hourly rate. It also shows the salary-divide-by-2080 number side by side so you can see how far it falls short. Optionally enter what you charge now and it tells you plainly whether you are undercharging.
Example only, not typical earnings. Target $70,000, expenses $6,000, 30% tax set-aside, 48 weeks, 40 hours, 60% billable. The revenue needed is $70,000 + $6,000 = $76,000, plus a 30% tax buffer of $22,800, for $98,800 total. Billable hours are 48 x 40 x 0.6 = 1,152. Your minimum rate is $98,800 / 1,152 = $85.76 per hour. The naive $70,000 / 2,080 gives $33.65, so the shortcut would have you undercharging by about 155%.
It assumes you bill every work hour, pay no taxes or expenses, and take no time off. None of that is true. Real billable hours are a fraction of hours worked, and taxes plus expenses take a big slice before you see income.
50 to 70% is realistic for most freelancers. The rest goes to proposals, admin, emails, marketing, and learning. New freelancers should use the lower end; if you spend most days in client work, use the higher end.
It is a common starting point, not a guarantee. Your actual rate depends on income, deductions, and where you live. This is general information, not tax advice; talk to a tax professional and look into quarterly estimated payments.
Software, gear, insurance, coworking, professional development, accounting, and anything you buy to do the work. Enter the yearly total as one number.
The optional verdict card shows what your current rate leaves you short of your target each year. Many freelancers raise rates for new clients first, then bring existing clients up gradually.
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