Updated November 1, 2026 for the 2026 tax year
Why your old hourly wage is the wrong starting point
An employer covers things you now pay yourself: the other half of Social Security and Medicare, equipment, insurance, paid time off, and all the hours spent on admin, quotes and finding work. If you charge what you used to earn per hour, you'll take home far less.
The formula
- Profit needed = take-home goal ÷ (1 − tax set-aside %)
- Revenue needed = profit needed + yearly business expenses
- Billable hours = hours per week × billable share × (52 − weeks off)
- Hourly rate = revenue needed ÷ billable hours
How to pick a billable share
Very few self-employed people bill 100% of their working hours. Quoting, invoicing, driving, marketing and email all eat time. Many solo service businesses land somewhere between 50% and 75%. If you're not sure, track a normal week and count only the hours you could put on an invoice.
How much to set aside for taxes
Self-employment tax alone is about 14% of profit after the 92.35% adjustment. Add federal and state income tax and many owners set aside 25% to 35%. For a closer number, run your figures through the quarterly tax estimator and divide total tax by profit.
Common questions
Should I charge by the hour or by the job?
Know your hourly floor either way. Flat pricing can earn more when you work fast, but you need your minimum hourly rate to check that a flat price is worth it.
What's a day rate?
A day rate is your hourly rate times the billable hours in a typical day. The calculator shows one based on your inputs.
Sources: IRS Rev. Proc. 2025-32 (2026 inflation adjustments), Social Security Administration 2026 wage base, IRS Publication 505 and Form 1040-ES.