How to Set Your Freelance Hourly Rate (Example Numbers)

By Cedar & Ledger

A freelance hourly rate has to cover more than the hours you bill. It also pays for the hours you spend finding clients and sending invoices, your business costs, time off, and money you set aside for taxes. This guide works backward from a yearly target to an hourly floor, checks it against the market, and shows how to turn it into a project price, using example numbers.

Every dollar figure here is a made-up example to show the math, not a typical or recommended rate. Rates vary a lot by field, skill and location, and tax rules depend on your situation. This is general information, not tax or financial advice.

Quick checklist

• ☐ Pick a yearly pay target
• ☐ List your yearly business costs
• ☐ Choose a tax set-aside percentage to start from
• ☐ Count your billable hours honestly
• ☐ Work out your hourly floor
• ☐ Check it against what others charge
• ☐ Turn it into project prices and track real hours

The steps below walk through each one.

Step 1: Pick a yearly pay target

Start with what you want to pay yourself in a year, the money that goes to rent, groceries, savings and the rest of your life. If you're replacing a job, your old yearly pay is a starting point. If freelancing is a side gig, pick the extra amount you want it to bring in.

Example (made-up numbers): a yearly pay target of $40,000.

Step 2: List your yearly business costs

These are costs you pay because of the business, not your personal bills. Common ones: software and subscriptions, equipment, a website, insurance, phone and internet share, and fees taken by payment apps or marketplaces.

Example (made-up numbers):

Step 3: Choose a tax set-aside to start from

As a freelancer, nobody takes taxes out of your pay, so part of every payment should go aside. The right amount depends on your income, deductions, state and other details. This example uses 25% of income only to show the math. How Much to Set Aside for Side Hustle Taxes explains how to pick a starting percentage, and the IRS website or a tax professional can tell you what applies to you.

Step 4: Count your billable hours honestly

Billable hours are the hours a client actually pays for. A lot of freelance time isn't billable: emails, quotes, invoicing, learning, and finding the next client. Most people also need weeks off for holidays, sick days and slow stretches.

Example (made-up numbers): 52 weeks − 4 weeks off = 48 working weeks. Out of a 40-hour week, 25 hours are billable and 15 go to admin and finding work. 48 × 25 = 1,200 billable hours a year.

If you counted every working hour (40 × 52 = 2,080), you'd be planning on far more paid time than you'll really have. Once you're billing, How to Track Billable Hours for Freelance Invoices shows a simple daily log so those hours actually make it onto the invoice.

Step 5: Work out your hourly floor

Money needed = (pay target + business costs) ÷ (1 − tax set-aside). Hourly floor = money needed ÷ billable hours.

Example (made-up numbers):

• ($40,000 + $2,000) ÷ (1 − 0.25) = $42,000 ÷ 0.75 = $56,000 a year
• $56,000 ÷ 1,200 hours ≈ $46.67 an hour

That's the floor: the lowest rate that hits the example target if the hours and costs hold. Compare it to the shortcut of $40,000 ÷ 2,080 hours ≈ $19.23 an hour, which leaves out costs, taxes and unpaid hours.

Rounding up gives you room. Example check: at $50 an hour, 1,200 hours × $50 = $60,000. Set aside 25% ($15,000) and pay the $2,000 in costs, and $43,000 is left, about $3,000 above the $40,000 target.

Side-gig example (made-up numbers): a $12,000 yearly target + $500 in costs, 10 billable hours a week for 48 weeks (480 hours): $12,500 ÷ 0.75 ≈ $16,667, then ÷ 480 ≈ $34.72 an hour.

Step 6: Check it against what others charge

Your floor tells you what you need. The market tells you what clients in your field expect to pay. Look at what people with similar skills and experience list on their own sites, on freelance marketplaces you'd actually use, and in groups for your field. Ask other freelancers you trust.

• If the market is well above your floor, you can price toward the market.
• If the market is below your floor, look at the inputs: more billable hours, lower costs, a narrower service clients pay more for, or a different type of client. Working below your floor for long means missing your own target.

New clients are the easiest place to test a higher rate. Existing clients usually get notice before a change, for example 30 days.

Step 7: Turn it into project prices and track real hours

Many clients prefer a project price. Estimate the hours, multiply by your rate, and add a buffer for revisions and back-and-forth.

Example (made-up numbers): a project you estimate at 12 hours × $50 = $600. Add a 20% buffer: $600 × 1.2 = $720.

Then track the hours you really spend. If that $720 project took 18 hours, your effective rate was $720 ÷ 18 = $40 an hour, below the $46.67 floor. That tells you to raise the estimate for the next similar project or tighten the scope in the agreement. For bigger projects, How to Ask Freelance Clients for a Deposit (Example Numbers) shows how to take part of the price up front. If your current clients are below your floor, How to Raise Your Freelance Rates (Email Script + Steps) has a short email and steps.

When you invoice by the hour, the hours and rate go on each line, and part of each payment goes to your tax set-aside. Example: a 10-hour invoice at $50 is $500. Setting aside 25% means $125 goes to the tax account when it's paid. How to Track Freelance Invoices So Clients Pay on Time covers payment terms and a weekly invoice routine.

To put a project price in front of a client, How to Write a Freelance Quote (Example Estimate) shows a full example quote.

Common snags

• Dividing by 2,080 hours. Most freelancers bill far fewer hours than they work.
• Forgetting business costs. Software and equipment come out of your rate, not on top of it.
• No tax set-aside. A rate that ignores taxes looks fine until the tax bill arrives.
• Never checking real hours. Projects that run long quietly lower your rate.
• Never revisiting the rate. Re-run the numbers once a year or when costs change.

If client payments come in unevenly month to month, How to Budget on an Irregular Income shows how to pay yourself a steady amount from a baseline month.

A simple way to track it

A notebook or a notes app works if you write down every invoice and payment. If you'd like a head start, the Freelancer Invoice + Client Tracker ($9, Excel and Google Sheets) has a printable invoice with hours and rate on each line, an invoice log where status shows Paid, Open or Overdue, a clients tab with billed, paid and outstanding per client, and a dashboard. It doesn't work out your rate for you, and it doesn't send emails or take payments (details). To log client payments with your business costs and see profit, the Small Business Bookkeeping Spreadsheet ($12, Excel and Google Sheets) has a transaction log with categories and a profit & loss (details).

Honest note: I make these templates and sell them under Cedar & Ledger, so I'd earn from a purchase. General information only, not tax or financial advice.

Try the free freelance rate calculator (find your hourly floor) →

Try the free freelance project quote calculator →

Try the free hours worked calculator →

Related template: read about the freelancer invoice template

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