Updated October 28, 2026
Find the lowest hourly rate that still pays you the income you want. It adds your business costs and US self-employment tax, then divides by the hours a client pays for.
Enter yearly figures in US dollars. The result is a floor: the rate below which you earn less than your target.
Method: self-employment tax = 12.4% of 92.35% of net profit (up to the 2026 Social Security wage base of $184,500) + 2.9% of 92.35% of net profit, as set by the IRS and the Social Security Administration. Income tax = your rate × (net profit − half of the self-employment tax). The day rate assumes 8 billable hours. It leaves out the 0.9% Additional Medicare Tax and wages from a job. Not tax advice.
Four numbers decide your floor. Get each one right and the division is easy.
Pick the yearly amount you want after business costs and taxes: the money that replaces a salary. The calculator calls it take-home income.
List what the business pays for in a year: software, hardware, internet, insurance, accounting and marketing. These go on top of your income goal. They also lower your taxes, because both taxes are charged on net profit, not on revenue.
An employee pays 7.65% for Social Security and Medicare, and the employer pays the other 7.65%. A freelancer pays both halves. The IRS sets self-employment tax at 15.3%: 12.4% for Social Security and 2.9% for Medicare. It applies to 92.35% of your net earnings, which makes the real cost about 14.13% of net profit. You owe it once your net earnings from self-employment reach $400 in a year.
Two limits matter at higher incomes. The 12.4% Social Security part stops at the wage base, which the Social Security Administration set at $184,500 for 2026. The 2.9% Medicare part has no limit, and an extra 0.9% Additional Medicare Tax starts above $200,000 for a single filer. You can deduct half of your self-employment tax when you work out your income tax.
Take holidays, vacation and sick days off 52 weeks. Then count only the hours a client pays for. Sales, proposals and invoicing are real work, but nobody pays for them. If you are not sure, track a few normal weeks first.
Say you want to keep $60,000 a year, spend $8,000 on the business, take 6 weeks off and bill 25 hours a week, with a 15% estimated income tax rate. You need about $83,414 of net profit. Self-employment tax on that is about $11,786 and income tax about $11,628, which leaves $60,000. Add the $8,000 of expenses and you need $91,414 of revenue. Divide by 1,150 billable hours (46 weeks × 25) and the floor is $79.49 an hour, or $636 for an 8-hour day.
Your floor is not your price. Charge more for specialist skills or strong demand, and never quote below the floor for long.
The IRS sets self-employment tax at 15.3%: 12.4% for Social Security and 2.9% for Medicare. It is charged on 92.35% of your net earnings from self-employment, so it equals about 14.13% of net profit. The Social Security part stops at the wage base, which the Social Security Administration set at $184,500 for 2026.
A freelancer pays both halves of Social Security and Medicare, pays for their own tools, insurance and time off, and cannot bill every working hour. An employee's wage covers only the hours worked, because the employer pays the rest.
Count only hours a client pays for. Sales, admin, invoicing and learning are not billable. Track a few normal weeks and use your real number. If you have no data yet, start lower than 40 hours a week.
In the US, the IRS expects quarterly estimated tax payments on Form 1040-ES if you expect to owe $1,000 or more for the year after withholding and credits. Self-employment tax is part of that amount.