Question 1

What is the difference between billing rate and true hourly rate?

Accepted Answer

Your billing rate is what you charge clients. Your true hourly rate is what you actually keep per hour worked, after self-employment tax (15.3%), federal and state income tax, business expenses (software, equipment, insurance, office), overhead (phone/internet/home office), and non-billable hours spent on admin, marketing, and revisions.

Question 2

How many billable hours can a freelancer realistically work per year?

Accepted Answer

1,200–1,500 billable hours is a realistic annual target for most solo freelancers after accounting for vacation, sick time, non-billable admin and business development (typically 20–30% of working hours), and project gaps between clients.

Question 3

What rate do I need to charge to net a specific hourly take-home?

Accepted Answer

Take your target net hourly rate, multiply by your total annual working hours (billable + non-billable), divide by (1 − combined tax rate) to gross it up, add total annual business expenses, then divide by annual billable hours. The calculator runs this reverse calc live.

Question 4

Why does non-billable time reduce my effective hourly rate?

Accepted Answer

Admin, marketing, and unpaid revisions are working hours you don't get paid for. If you bill 25 hrs/wk but work 36 hrs/wk total, your true rate is roughly 30% lower than your billing rate even before taxes and expenses — utilization is the silent killer.

True Hourly Rate Calculator