Why most freelancers underprice

The mistake is thinking in gross. A freelancer who quotes $80/hr and works 40 billable hours a week doesn't take home $166,400. After self-employment tax, federal tax, state tax, and overhead, the number is closer to $90,000 — and often less. The calculator solves backwards from what you actually want to keep.

Self-employment tax is the one most people miscalculate. It's 15.3% on 92.35% of your net earnings — not on gross revenue, not on take-home, and not on the full 100%. The 0.9235 multiplier comes from the Schedule SE simplified method, which accounts for the fact that employees only pay half of FICA. As a sole proprietor, you pay both sides. You do get to deduct half of SE tax from your taxable income, which slightly reduces your federal and state tax bill, but the savings are modest.

Billable percentage is the input most people get wrong. If you work 40 hours a week but only 60% of those hours bill to clients, your actual annual billable hours are 1,248 — not 2,080. Administrative work, sales calls, revisions, and unbillable project time are real costs. A $100/hr rate at 60% billability delivers the same annual revenue as $60/hr at 100% billability.

How the solver works

The calculation is circular: your gross revenue affects your SE tax, which affects your taxable income, which affects your federal and state tax, which determines what's left for take-home. No single formula solves this directly. The calculator runs 10 iterative passes, each using the previous result to refine the estimate, until the answers converge within $0.50. Ten passes is enough for any realistic income level.

The peer band

The percentile comparison uses self-reported rates from US knowledge-work freelancers across disciplines — design, engineering, writing, consulting, marketing. The median (p50) sits at $120/hr. If your required rate comes in well above p75 ($185/hr), that's not necessarily a problem — it means your take-home goal, hours, or cost structure needs to be re-examined, or your market is one where rates support it. Knowing where you fall relative to the range is more useful than any single benchmark.

Tax inputs

The calculator uses effective tax rates, not marginal rates. Your effective federal rate is total federal tax paid divided by taxable income — typically 15-22% for most self-employed workers earning between $60K and $200K. If you're not sure of your state rate, a rough effective rate of 4-6% works for most states with income taxes. States with no income tax (Texas, Florida, Nevada, Washington, Wyoming, South Dakota, Alaska) get entered as 0.

Results are estimates for planning purposes. Tax law and rates referenced as of tax year 2026. Consult a CPA or enrolled agent before setting rates or making financial decisions based on these projections.