How to set your freelance rate in the US (and stop undercharging)

Most freelancers anchor their rate to what a salaried employee earns per hour. That’s the wrong number — it ignores self-employment tax, unpaid time, and the benefits you now fund yourself. Here’s the right calculation, and how to actually charge it.

Why salary-to-hour math under-prices you

A $100,000/year salaried employee gets paid for roughly 2,000 hours a year, and their employer also covers half of their payroll taxes, health insurance, a 401(k) match, paid time off, and the office they sit in. Divide $100,000 by 2,000 and you get $50/hour — but that’s the salary, not the true cost of employing someone, and definitely not your freelance equivalent.

As a freelancer:

• You only bill ~50–70% of your working hours. The rest is sales, admin, scoping, and revisions.
• You pay self-employment tax— roughly 15.3% (Social Security + Medicare) on your net earnings, because you cover both the employer and employee halves. (You do get to deduct half of it, which softens the blow a little.)
• You buy your own software, internet, hardware, and accountant.
• You fund your own health insurance, retirement, and paid time off.
• You absorb client-side risk: late payment, scope creep, and dead projects.

The honest formula

hourly_rate = (target_income / (1 - effective_tax_rate) + annual_expenses)
              / (working_weeks * hours_per_week * billable_pct)

Plug numbers in (illustrative — confirm your own rates):

• Target take-home: $90,000/year
• Effective tax rate (federal income tax + ~15.3% self-employment tax + state tax where applicable): assume ~30% blended for this example
• Annual business expenses (software, hardware, insurance): $15,000
• Working weeks: 46 (a realistic buffer for holidays, sick days, and unpaid vacation)
• Hours/week: 40
• Billable: 60%

That gives a billable-hours base of about 1,104 hours, gross income needed of roughly $143,000 ($90,000 ÷ 0.70, plus $15,000 expenses), and an hourly rate of about $130/hour. Your real number depends on your tax bracket and state — run it for your situation, ideally with a CPA.

The four moves that get clients to pay your real rate

1. Price by outcome where possible, not by hour

Hourly billing caps your earnings at your speed. “A logo rebrand: $4,500” lets a fast 6-hour project pay like a 20-hour one. The client also stops worrying about you padding hours.

2. Tier 3 packages, always

When you list a single price, the negotiation is “your price vs the next person.” List three (Standard / Recommended / Premium) and the negotiation becomes “which of your packages fits.” Recommended is what most clients pick — that’s what you anchor on.

3. Discount the bottom, not the top

When someone pushes back, never drop the price of your standard offer. Take features out instead — fewer revisions, slower turnaround, fewer deliverables. The client now sees a clear ladder: pay less to get less.

4. Quote ranges, not exact numbers, for new clients

“$3,000 to $5,000 depending on scope” lets you settle on the high end when the actual project is bigger than they described. A flat “$3,000” locks you in.

Annual rate increase: do it

Raise your rate ~10% every 6–12 months. Most clients don’t even notice; the ones who do are the ones who would have churned anyway. Long-term retainers should have an inflation clause baked in (CPI + 3%, capped at 15%).

When you’re ready to put the rate on a real invoice, start Infacam free — we’ll handle the invoice, the PDF, and the chase-up for you.