Billable Hourly Rate Calculator
Freelancers and consultants routinely set their hourly rate too low because they divide the salary they want by the hours they work, forgetting that most working hours are never billed. This calculator does it properly. You enter the total annual income you need to cover, meaning your desired take-home pay plus self-employment taxes, software, insurance, retirement saving and a buffer, and the number of hours you can realistically bill in a year. It returns the hourly rate you must charge to reach that target. The crucial input is billable hours, which is far below the 2,080 hours in a full-time year once you remove holidays, admin, marketing, sick days and the inevitable gaps between projects. Many independents bill between 1,000 and 1,500 hours, so each non-billable hour has to be funded by the rate on the hours you do bill. Adjust both numbers to see how a fuller schedule lowers your required rate, or how rising costs push it up, and treat the result as a floor rather than a ceiling. Every figure is computed deterministically from the formula shown below, with a worked example that reconciles exactly to the calculator defaults so you can trust the rate before you quote a client.
Your rate is the income you need divided by the hours you can bill: rate = target income / billable hours. A $120,000.00 annual target over 1,500 billable hours means you must charge $80.00 per hour.
Billable rate formula
Hourly rate = Annual income target / Annual billable hours
Income target = take-home + costs + taxes + buffer
Billable hours = hours you can actually invoice
Every non-billable hour has to be paid for by the hours you do bill, so the fewer hours you can invoice, the higher your rate must be to fund the same annual income.
Worked example
A consultant needs 120,000 dollars a year and can realistically bill 1,500 hours.
- Annual income target = 120,000
- Billable hours = 1,500
- Hourly rate = 120,000 / 1,500 = 80.00
The required rate is 80.00 dollars an hour. These are the calculator's default inputs, so the result above matches the widget exactly.
Required rate for a 120,000 target
Billing fewer hours forces a higher rate for the same annual income.
| Billable hours | Required rate |
|---|---|
| 1,000 | $120.00 |
| 1,200 | $100.00 |
| 1,500 | $80.00 |
| 2,000 | $60.00 |
Self-employment income and budgeting basics: US Securities and Exchange Commission, Investor.gov.
Billable rate calculator: frequently asked questions
How do I set a billable hourly rate?
Divide the annual income you need to cover (your target take-home plus all business costs and taxes) by the number of hours you can actually bill in a year. If you need 120,000 dollars and can bill 1,500 hours, you must charge 80 dollars an hour. The trap is overestimating billable hours: admin, sales, holidays and downtime all reduce them well below the hours you work.
How many hours can I really bill?
Far fewer than the 2,080 hours in a full-time year. After holidays, sick days, marketing, admin and unbilled gaps, many independent professionals bill somewhere between 1,000 and 1,500 hours. Use a realistic number, because every non-billable hour has to be paid for by your billable rate.
Should my target include taxes and costs?
Yes. Your income target should cover not just your desired take-home pay but also self-employment taxes, software, equipment, insurance, retirement saving and a buffer. If you only divide your desired salary by your hours, your rate will be too low to keep the lights on.
Is my rate the same as my profit?
No. The billable rate is gross revenue per hour. Your profit is what remains after costs and taxes. That is exactly why your income target in this tool should already include those costs, so the resulting rate funds the whole business and not just your salary.
What is the billable rate formula?
Hourly rate equals the annual income target divided by annual billable hours. Increasing the target raises the rate; increasing billable hours lowers it.
Official sources
- Self-employment income and budgeting basics: US Securities and Exchange Commission, Investor.gov. As at 25 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 25 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.