People search for a freelancer hourly rate after tax when the invoice says $150 and the month does not feel like $150.
The rate you quote is the top of the stack. Expenses come off. A tax reserve comes off. Then what is left is spread across every hour you worked, billed or not.
The freelancer effective hourly calculator uses:
(billed rate × billable hours - expenses) × (1 - tax reserve) / (billable hours + unpaid hours)
The reserve is a share you type. It is not a tax calculation. Topic 554 is the self-employment tax on net earnings, 15.3% of 92.35%, and income tax sits on top of that. A reserve that is only the SE piece will be lower than a reserve that also holds income tax. The self-employment tax reserve post is that set-aside from profit. A draw versus a salary, on an annual amount, is the owner draw post.
The rate you would need to charge, starting from a target income, is the other direction. That is the freelance hourly calculator and the rate post. This page starts from the rate you already quote.
If you already know last month’s revenue and want the same division, the take-home hourly calculator starts from revenue instead of from a rate. The arithmetic after that is the same shape. Hours in the denominator are billable plus unpaid.
Fig 1
From the quote to the hour you keep
Unpaid hours stay in the denominator
Multiply the rate by billable hours, subtract expenses, hold back the reserve, then divide by every hour worked.
Example 1: the calculator defaults
Inputs: billed rate $150, billable hours 90, unpaid hours 45, expenses $1,800, tax reserve 25%.
Billed revenue: 150 × 90 = $13,500
After expenses: 13,500 - 1,800 = $11,700
Tax reserve: 11,700 × 0.25 = $2,925
Take-home: 11,700 × 0.75 = $8,775
Hours worked: 90 + 45 = 135
Effective hourly: 8,775 / 135 = $65.00
Calculator result
Freelancer effective hourly
- Billed hourly rate
- $150.00
- Billable hours this month
- 90 hrs
- Unpaid hours this month
- 45 hrs
- Monthly business expenses
- $1,800.00
- Tax reserve
- 25%
$65.00
effective take-home per hour worked
- Monthly take-home
- $8,775.00
- All hours worked
- 135
- Billed revenue
- $13,500.00
Of the $13,500, expenses are 1,800 / 13,500 = 13.3%. The reserve is 2,925 / 13,500 = 21.7%. Take-home is 8,775 / 13,500 = 65%. Those three shares add to 100%.
Billable hours are 90 of 135, which is 66.7% of the hours. The other third is admin and sales. The $65 is what the month keeps per hour worked, not per hour invoiced.
Twelve copies of this month would bill 13,500 × 12 = $162,000 and keep 8,775 × 12 = $105,300. That is twelve identical months. It is not a forecast.
Fig 2 · 1/3
Where the $13,500 goes
Defaults. $1,800 of expenses, 25% reserve.
Expenses
$1,800
Tax reserve
$2,925
Take-home
$8,775
Expenses take $1,800. That is 13.3% of billed revenue.
The reserve takes $2,925. Take-home is $8,775, which is $65 over 135 hours.
Example 2: drop the unpaid hours to zero
Same rate, same 90 billable hours, same $1,800, same 25% reserve. Unpaid hours 0.
Take-home stays $8,775. The denominator is now 90.
8,775 / 90 = $97.50
The $97.50 divides by invoiced hours only. The $65 divides by the 135 hours in the month. The gap is 97.50 - 65.00 = $32.50 an hour, which is the unpaid time showing up in the rate.
Calculator result
Freelancer effective hourly
- Billed hourly rate
- $150.00
- Billable hours this month
- 90 hrs
- Unpaid hours this month
- 0 hrs
- Monthly business expenses
- $1,800.00
- Tax reserve
- 25%
$97.50
effective take-home per hour worked
- Monthly take-home
- $8,775.00
- All hours worked
- 90
- Billed revenue
- $13,500.00
I would keep the unpaid hours in the box. The formula is built to divide by them.
Example 3: move the unpaid hours and hold everything else
Take-home stays $8,775 as long as the rate, the 90 billable hours, the $1,800, and the 25% reserve stay put. Only the denominator changes.
| Unpaid hours | All hours | Effective hourly |
|---|---|---|
| 0 | 90 | $97.50 |
| 15 | 105 | $83.57 |
| 30 | 120 | $73.13 |
| 45 | 135 | $65.00 |
| 60 | 150 | $58.50 |
| 75 | 165 | $53.18 |
8,775 / 105 = 83.571…, which the page rounds to $83.57.
8,775 / 120 = $73.125, shown as $73.13.
8,775 / 150 = $58.50.
8,775 / 165 = 53.181…, shown as $53.18.
Going from the default 45 unpaid hours to 15 raises the kept rate from $65 to $83.57. That is 83.57 - 65 = $18.57 an hour, while billed revenue stays $13,500.
Fig 3 · 1/6
Kept rate as unpaid hours rise
Take-home stays $8,775. Billable hours stay at 90.
Dollars per hour
- Kept per hour
| Point | Kept per hour |
|---|---|
| 0 | 97.5 |
| 15 | 83.6 |
| 30 | 73.1 |
| 45 | 65 |
| 60 | 58.5 |
| 75 | 53.2 |
With no unpaid hours the $8,775 is $97.50 an hour. At 15 unpaid hours it is $83.57.
At 45 unpaid hours the kept rate is $65. At 60 it is $58.50, and at 75 it is $53.18.
The axis rounds to a tenth. The table above is the page’s cent.
Example 4: set the tax reserve to zero
Same $150, 90 billable hours, 45 unpaid hours, $1,800 of expenses. Reserve 0%.
After expenses the profit is still $11,700. Nothing is held back.
11,700 / 135 = 86.666…, which the page shows as $86.67
The 25% reserve was $2,925. Spread over 135 hours, 2,925 / 135 = $21.67 an hour.
86.67 - 65.00 = $21.67
A reserve of zero describes a month with no tax held back. It does not describe the tax. Topic 554 still applies if net earnings from the work are $400 or more. The 25% in the default box is larger than 15.3% because a planning reserve often holds income tax in the same pile. The page will use whatever percent you type.
Example 5: the quote drops to $85
Billable 90, unpaid 45, expenses $1,800, reserve 25%. Rate $85.
Billed revenue: 85 × 90 = $7,650
After expenses: 7,650 - 1,800 = $5,850
Take-home: 5,850 × 0.75 = $4,387.50
Effective: 4,387.50 / 135 = $32.50
The quoted rate fell from $150 to $85, which is a drop of $65. The kept rate fell from $65 to $32.50, a drop of $32.50. Expenses and the reserve take a fixed bite out of a smaller invoice, so the kept rate moves by less than the quote, and it lands lower as a share of the quote. 32.50 / 85 = 38.2%. On the default, 65 / 150 = 43.3%.
Example 6: billable hours fall to 60
Rate stays $150. Unpaid stays 45. Expenses $1,800. Reserve 25%. Billable hours 60.
Billed revenue: 150 × 60 = $9,000
After expenses: 9,000 - 1,800 = $7,200
Take-home: 7,200 × 0.75 = $5,400
Hours: 60 + 45 = 105
Effective: 5,400 / 105 = 51.428…, shown as $51.43
The default month kept $65 on $13,500 of invoices. This month keeps $51.43 on $9,000. Billable share of the hours is 60 / 105 = 57.1%, down from 66.7%.
Thirty fewer billed hours removed 30 × 150 = $4,500 from revenue. After the 25% reserve, 4,500 × 0.75 = $3,375 of that would have been take-home. 8,775 - 3,375 = $5,400, which matches. The hours in the denominator also fell, from 135 to 105, which is why the hourly rate did not fall by the full $3,375 / 135.
Example 7: a slow month
Rate $150, billable 20, unpaid 50, expenses $1,800, reserve 25%.
Billed revenue: 150 × 20 = $3,000
After expenses: 3,000 - 1,800 = $1,200
Take-home: 1,200 × 0.75 = $900
Hours: 20 + 50 = 70
Effective: 900 / 70 = 12.857…, shown as $12.86
Calculator result
Freelancer effective hourly
- Billed hourly rate
- $150.00
- Billable hours this month
- 20 hrs
- Unpaid hours this month
- 50 hrs
- Monthly business expenses
- $1,800.00
- Tax reserve
- 25%
$12.86
effective take-home per hour worked
- Monthly take-home
- $900.00
- All hours worked
- 70
- Billed revenue
- $3,000.00
The quote is still $150. The month keeps $12.86 per hour worked because most of the hours were unpaid and the expenses took $1,800 of a $3,000 invoice.
Twelve copies of this slow month keep 900 × 12 = $10,800. Twelve copies of Example 1 keep $105,300. Same rate, same expense line, same reserve. The billable hours are the difference.
Example 8: expenses larger than the invoices
Rate $100, billable 10, unpaid 40, expenses $1,800, reserve 25%.
Billed revenue: $1,000
After expenses: 1,000 - 1,800 = -$800
The formula then multiplies by 0.75: -800 × 0.75 = -$600
Hours: 50
Effective: -600 / 50 = -$12.00
The reserve shrinks the loss in the box, from $800 to $600. It does not create a refund. The reserve is a planning share, and on a loss month it scales a negative profit. Cash still left the account for the $1,800.
A rate of $0 with the default hours and expenses is the same shape. Revenue is $0. Take-home is (0 - 1,800) × 0.75 = -$1,350. Over 135 hours that is -$10.00 an hour.
Example 9: owner pay stuffed into expenses
Start from Example 1 and add $4,000 of “pay yourself” to the $1,800 expense box. Expenses become $5,800. Everything else stays.
Billed revenue: still $13,500
After expenses: 13,500 - 5,800 = $7,700
Take-home: 7,700 × 0.75 = $5,775
Effective: 5,775 / 135 = 42.777…, shown as $42.78
The $4,000 is the owner’s own money. The formula treated it as a business cost, so the take-home fell from $8,775 to $5,775 and the kept rate fell from $65 to $42.78. If you also live on that $4,000, you have counted it once as a cost and once as pay. Take it out of the expense box. Expenses go back to $1,800, and take-home goes back to $8,775.
The SBA manage-your-business guide treats revenue, costs, and cash as figures you track on a period you choose. Owner pay is the leftover in this formula, not a line in the expense box.
Example 10: a high quote with a heavy sales week
Rate $250, billable 40, unpaid 60, expenses $2,200, reserve 25%.
Billed revenue: 250 × 40 = $10,000
After expenses: 10,000 - 2,200 = $7,800
Take-home: 7,800 × 0.75 = $5,850
Hours: 40 + 60 = 100
Effective: 5,850 / 100 = $58.50
The quote is $250. The kept rate is $58.50, which is 58.50 / 250 = 23.4% of the quote. Unpaid hours are 60% of the month. Example 1 kept 43.3% of a lower quote because 90 of 135 hours were billed.
A designer on a smaller book: rate $95, billable 60, unpaid 30, expenses $900, reserve 28%.
Revenue: 95 × 60 = $5,700
After expenses: 5,700 - 900 = $4,800
Take-home: 4,800 × 0.72 = $3,456
Hours: 90
Effective: 3,456 / 90 = $38.40
And a busier month at a higher reserve: rate $200, billable 80, unpaid 20, expenses $3,000, reserve 32%.
Revenue: 200 × 80 = $16,000
After expenses: 16,000 - 3,000 = $13,000
Take-home: 13,000 × 0.68 = $8,840
Hours: 100
Effective: 8,840 / 100 = $88.40
Twelve copies of that month keep 8,840 × 12 = $106,080. Billable hours in that year would be 80 × 12 = 960. The kept rate stays $88.40 only if every month matches this one.
One more, a lower rate and a long month: rate $75, billable 100, unpaid 60, expenses $1,200, reserve 30%.
Revenue: $7,500
After expenses: 7,500 - 1,200 = $6,300
Take-home: 6,300 × 0.70 = $4,410
Hours: 160
Effective: 4,410 / 160 = $27.5625, shown as $27.56
Fig 4 · 1/2
Quoted rate beside the rate kept
Each pair is one month from the examples.
Dollars per hour
- Quoted
- Kept
| Category | Quoted | Kept |
|---|---|---|
| $150 default | 150 | 65 |
| $85 quote | 85 | 32.5 |
| $250 quote | 250 | 58.5 |
| Slow month | 150 | 12.9 |
The default quote is $150. The month keeps $65 an hour worked.
At $85 the month keeps $32.50. At $250 it keeps $58.50. The slow month keeps $12.86.
Fig 5 · 1/5
Monthly take-home on five months
Same formula. Different rates, hours, expenses, and reserves.
Take-home
Defaults
$8,775
No reserve
$11,700
60 billed
$5,400
Slow month
$900
$200 rate
$8,840
The default month keeps $8,775. A 0% reserve keeps $11,700 of the same invoices.
Sixty billable hours keep $5,400. The slow month keeps $900. The $200 month keeps $8,840.
The results side by side
| Example | Rate | Billed hrs | Unpaid hrs | Expenses | Reserve | Revenue | Take-home | Kept / hour |
|---|---|---|---|---|---|---|---|---|
| 1. Defaults | $150 | 90 | 45 | $1,800 | 25% | $13,500 | $8,775 | $65.00 |
| 2. No unpaid hours | $150 | 90 | 0 | $1,800 | 25% | $13,500 | $8,775 | $97.50 |
| 3. 15 unpaid | $150 | 90 | 15 | $1,800 | 25% | $13,500 | $8,775 | $83.57 |
| 3. 30 unpaid | $150 | 90 | 30 | $1,800 | 25% | $13,500 | $8,775 | $73.13 |
| 3. 60 unpaid | $150 | 90 | 60 | $1,800 | 25% | $13,500 | $8,775 | $58.50 |
| 3. 75 unpaid | $150 | 90 | 75 | $1,800 | 25% | $13,500 | $8,775 | $53.18 |
| 4. Reserve at 0% | $150 | 90 | 45 | $1,800 | 0% | $13,500 | $11,700 | $86.67 |
| 5. Lower quote | $85 | 90 | 45 | $1,800 | 25% | $7,650 | $4,387.50 | $32.50 |
| 6. 60 billed | $150 | 60 | 45 | $1,800 | 25% | $9,000 | $5,400 | $51.43 |
| 7. Slow month | $150 | 20 | 50 | $1,800 | 25% | $3,000 | $900 | $12.86 |
| 8. Expenses win | $100 | 10 | 40 | $1,800 | 25% | $1,000 | -$600 | -$12.00 |
| 8. Rate at zero | $0 | 90 | 45 | $1,800 | 25% | $0 | -$1,350 | -$10.00 |
| 9. Pay in expenses | $150 | 90 | 45 | $5,800 | 25% | $13,500 | $5,775 | $42.78 |
| 10. Sales-heavy | $250 | 40 | 60 | $2,200 | 25% | $10,000 | $5,850 | $58.50 |
| 10. Smaller book | $95 | 60 | 30 | $900 | 28% | $5,700 | $3,456 | $38.40 |
| 10. Busier month | $200 | 80 | 20 | $3,000 | 32% | $16,000 | $8,840 | $88.40 |
| 10. Long month | $75 | 100 | 60 | $1,200 | 30% | $7,500 | $4,410 | $27.56 |
Open the freelancer effective hourly calculator with the rate on the invoice, the hours you billed, the hours you did not, the expenses that are business costs, and the reserve you intend to hold. If the reserve is doing the work of a tax estimate, read Topic 554 and the reserve post before you treat 25% as the bill. The rate that would hit a target income, going the other direction, is the freelance rate post.