See exactly how much you actually keep after self-employment tax, income tax, and expenses — and your real hourly rate.
$0.00
After all taxes & expenses
Take-Home Pay
$0
Total Tax Burden
$0
⚡ Reality Check
You charge $0/hr but after taxes & expenses, you actually earn $0/hr. That's 0% less than you think.
The Freelance Tax Calculator (often called a True Hourly Rate Calculator) is a vital tool for 1099 contractors, sole proprietors, and self-employed professionals. When you transition from a standard W-2 employee to a freelancer, one of the biggest shocks is realizing that your billed hourly rate is vastly different from your actual take-home pay. This tool helps bridge that gap.
By factoring in your billable hours, non-billable administrative time, business expenses, and the heavy burden of self-employment taxes, this calculator reveals your "True Hourly Rate." Understanding this number is the only way to accurately price your services, ensuring you actually earn the income you need to survive and thrive as a business owner.
The mathematics of freelance income require you to act as both the employee and the employer. Your revenue must cover overhead, taxes, and your actual salary. Here is how the calculator breaks it down:
First, we calculate your Gross Income by multiplying your Hourly Rate by your Billable Hours per week, and then by the number of Weeks Worked per year. We then subtract your total annual Business Expenses (software, internet, equipment, marketing) to find your Net Profit. Only your Net Profit is subject to taxation.
This is where freelancers get hit the hardest. As a W-2 employee, you pay 7.65% in Medicare and Social Security taxes, and your employer pays the other 7.65%. As a freelancer, you are both the employee and the employer, so you must pay the full 15.3% Self-Employment Tax. The IRS calculates this on 92.35% of your Net Profit.
After calculating the SE Tax, you are allowed to deduct half of that SE Tax from your Net Profit before calculating your standard income tax. We then apply your estimated Tax Bracket percentage to determine your remaining tax burden. Your Take-Home Pay is your Net Profit minus both the SE Tax and your Income Tax.
Finally, we calculate your True Hourly Rate by dividing your Take-Home Pay by your Total Hours Worked. This includes both your billable hours and the unbilled admin hours you spend doing accounting, marketing, and client communication.
John leaves his $30/hour corporate job to freelance. He decides to charge his clients $40/hour, assuming the $10 bump will cover his expenses. He bills 30 hours a week, works 48 weeks a year, and spends 10 hours a week on unpaid admin work. His Gross Income is $57,600. After deducting $3,000 in expenses, his Net Profit is $54,600. The SE Tax (15.3%) takes about $7,700, and his income tax takes another $5,000. John's Take-Home Pay is roughly $41,900. When divided by his total hours worked (40 hours/week × 48 weeks = 1,920 hours), John's True Hourly Rate is $21.80/hour. He took a massive pay cut without realizing it.
Maria is a consultant who understands the math. She wants to actually take home $50/hour. Knowing she will lose about 30% to taxes and expenses, and knowing she spends 15 hours a week on non-billable admin work, she sets her client rate at $110/hour. She bills 25 hours a week for 46 weeks, generating $126,500. After $10,000 in software and marketing expenses, and roughly $32,000 in SE and Income taxes, her Take-Home Pay is $84,500. Divided by her 1,840 total hours worked, her True Hourly Rate lands at a comfortable $45.92/hour.
The IRS states an expense must be both "ordinary and necessary" for your trade. Common freelance deductions include software subscriptions (Adobe, Office), web hosting, a portion of your home internet/utilities (if you have a dedicated home office), advertising, and business equipment like a laptop or camera.
Because an employer is not withholding taxes from your paycheck, the IRS requires you to make Estimated Quarterly Tax Payments. You must send a check or make an online payment to the IRS four times a year (usually April, June, September, and January). Failing to do so can result in underpayment penalties.
You don't pay taxes on unbilled hours. However, those unbilled hours (marketing, accounting, pitching) take up your valuable time. The True Hourly Rate calculation factors them in to show you what your actual "wage" is when accounting for the total time you dedicated to running your business.
A standard single-member LLC is taxed exactly the same as a Sole Proprietorship (it is a "disregarded entity" to the IRS). However, if your net profit exceeds roughly $60,000 to $80,000, you may elect to have your LLC taxed as an S-Corporation, which can potentially save you money on Self-Employment taxes by paying yourself a W-2 salary.