What your freelance rate actually pays you after tax

Updated 2026-09-02

You do not get paid your rate. You get paid what is left after tax and expenses. Here is what that does to the number you quote.

Your rate is a revenue number, not a pay number

Freelancers treat their hourly rate as if it were their pay. It is not. A $90 rate is gross revenue — before self-employment tax, before federal and state income tax, before the business expenses that rate has to cover. The figure that decides your lifestyle is what lands in your pocket per hour you work, and for most freelancers that is 40% to 55% below the headline.

The take-home rate calculator makes this exact for your own numbers. The pattern is striking: a $90 rate across a full billable year often produces an effective rate around $48 to $57 an hour once tax is accounted for.

Why the gap is bigger than expected

Three layers stack. Self-employment tax takes about 14% of your profit. Federal income tax lands on what is left, at your bracket. State tax (where it applies) takes a further slice of the same profit. For a freelancer billing $90 across roughly 1,920 hours, gross revenue is about $173,000; after expenses and the combined tax load, take-home typically lands near $95,000–$110,000 — an effective rate a long way from $90.

This is why comparing your quoted rate to a salaried offer is a category error. The salary has its own deductions, but it also has benefits and no self-employment tax. The only fair comparison is effective rate to effective rate, which is exactly what the calculator produces.

The two levers that move it

Billable hours matter more than the rate. The effective rate divides take-home by the hours you actually work, so 1,900 billable hours lifts it far more than a small rate increase — and a rate bump is partly eaten by the higher tax it triggers. This is the same logic the hourly rate calculator uses: raise the billable share before you raise the price.

The second lever is deductible expenses and retirement contributions. Both reduce taxable profit, so every dollar spent on a legitimate business cost or a Solo 401(k) is partially refunded by the tax it avoids. At a 35% combined rate, a $10,000 contribution costs about $6,500 out of pocket. The retirement calculator and this one tell the same story from different angles.

Use it before a negotiation

"I need to charge $X" is weak. "At $X my effective hourly rate after tax is $Y, which is what this role is worth to me" is not. The effective rate is also the honest basis for deciding whether a job is worth taking at all: if it implies an effective rate below a comparable salary, the difference is the premium you are being paid for the risk of freelancing — useful to know before you under-price.

One caveat: the state line in the calculator is a flat percentage of profit, which simplifies how states actually tax pass-through income. Many offer a deduction that lowers the effective rate, and a few have no income tax. Enter 0 if your state has none, and treat the state figure as approximate rather than exact.