Target Income Rate Calculator

Know exactly what hourly rate you need to charge to hit your income goal — based on your real working hours, expenses, and tax situation.

Income & Expenses

Annual Income Goal ? The total revenue or take-home income you want to generate in a year — before or after expenses, your choice.

Annual Business Expenses ? Software, insurance, equipment, subscriptions, and any other costs required to run your business. Software, insurance, equipment, subscriptions

Your Working Schedule

Billable Hours Per Week ? Only count hours you actually invoice clients for. Admin, emails, and business development are not billable.

Weeks Worked Per Year ? Subtract vacation, public holidays, and sick days. Most US freelancers use 46–50 weeks.

Tax Reserve

Tax Buffer ? Self-employed professionals in the US typically owe 25–35% in combined federal, state, and self-employment taxes.

Percentage reserved for taxes on your income 25%

Your Rate Breakdown

Recommended Hourly Rate

—

your minimum profitable rate

Annual Revenue Target

—

incl. expenses & tax reserve

Billable Hours / Year

—

total client hours

Weekly Revenue Goal

—

per working week

Monthly Revenue Goal

—

per month average

Understanding Your Hourly Rate

The Core Formula

Your hourly rate is simply your total revenue target — income plus expenses plus taxes — divided by the number of hours you can actually bill clients in a year.

Rate = Revenue Target ÷ Annual Billable Hours

Billable vs. Total Hours

A 40-hour work week does not mean 40 billable hours. Admin work, proposals, invoicing, networking, and professional development are all real but unpaid. Most freelancers bill 20–30 hours of a 40-hour week.

Billable Hrs = Weekly Hrs × Weeks Worked

Why Include Business Expenses?

Software, a reliable laptop, subscriptions, insurance, and professional memberships are costs of doing business — not personal expenses. Your hourly rate must recover these, or they come out of your income.

Revenue Target = Income Goal + Expenses

The Tax Buffer Explained

Unlike salaried employees, self-employed professionals pay both the employee and employer share of Social Security and Medicare (15.3%), plus income tax. A 25–30% buffer is prudent for most US professionals.

Adjusted Target = Revenue × (1 + Tax%)

Business Examples

Freelance Designer

Graphic / Brand Designer

$70k income goal · $6k expenses · 25 billable hrs/week · 48 weeks · 25% tax buffer

≈ $79/hr

Consultant

Business Strategy Consultant

$130k income goal · $10k expenses · 20 billable hrs/week · 46 weeks · 30% tax buffer

≈ $230/hr

Contractor

IT / Systems Contractor

$110k income goal · $8k expenses · 35 billable hrs/week · 50 weeks · 28% tax buffer

≈ $97/hr

Marketing Pro

Freelance Marketing Manager

$80k income goal · $5k expenses · 28 billable hrs/week · 48 weeks · 25% tax buffer

≈ $89/hr

Why most professionals underestimate their hourly rate

Treating all hours as billable. You may work 40 hours but only invoice 20. That means every billable hour has to carry the cost of the other 20. Ignoring this cuts your effective rate in half.
Skipping business expenses. Every subscription, license, piece of equipment, and insurance premium is a cost of doing business. None of it is free — your rate must absorb it.
Ignoring taxes entirely. Charging $100/hr and keeping $100/hr are very different things. At a 30% effective tax rate, you're keeping $70. Your rate must account for what the IRS takes.
Copying market rates without checking the math. What a competitor charges reflects their costs and situation — not yours. Build your rate from your own numbers first, then compare to the market.
Not accounting for slow months. Work isn't evenly distributed. Building a higher rate during busy periods funds the slower ones. A sustainable rate is designed for the whole year, not a full-capacity month.

Frequently Asked Questions

This is your minimum profitable rate — charge less and you won't hit your income goal. In practice, you should charge this or more. Factors like specialization, demand, client budget, and project complexity can — and often should — push your rate higher. Think of this as your floor, not your ceiling.

Be conservative and honest. If you work 40 hours per week but spend 15 on admin, proposals, and business development, enter 25. Overstating billable hours gives you a rate that looks lower than it truly needs to be — which leads to undercharging in practice.

Enter your desired take-home income — the amount you want to actually keep after taxes. The tax buffer slider then adds a reserve on top so you can cover your tax bill without touching your income. If you enter your income goal after taxes and also set a tax buffer, the calculator handles the gross-up correctly.

Most US self-employed professionals should use 25–30%. This covers self-employment tax (15.3%) plus federal income tax. If you're in a high-income state like California or New York, consider 30–35%. When in doubt, consult a CPA — getting this wrong means a surprise bill at tax time.

You have a few levers: increase your billable hours, reduce expenses, lower your income goal temporarily, or find clients who value and pay for premium work. If the math consistently doesn't work in your market at your experience level, it's a signal to either niche down, upskill, or target a different client segment — not to charge below your cost.

At minimum, once per year — ideally at the start of each year or before renewing long-term contracts. Any time your expenses increase significantly, your income goal changes, or your working schedule shifts, run the numbers again. Inflation alone erodes your real rate by 3–5% per year if you never raise it.