Use this calculator when comparing $75/hr contract vs $120k salary offers — the headline numbers lie if you ignore billable hours, taxes, and overhead. Below, we’ll break down the formulas, hidden costs, and how to decide which pay structure works for you.
Quick Calculator
Annual gross: $108,000
The Formula
Annual gross = hourly rate × billable hours per week × working weeks per year
Example: $75 × 30 × 48 = $108,000 gross before tax and expenses.
How to Use the Calculator Effectively
1. Set Realistic Billable Hours
Freelancers rarely bill 40 hours/week. Track your time for a month to find your average: - 20–25 hours/week: Common for part-time freelancers or those with family commitments. - 30–35 hours/week: Full-time freelancers with steady clients. - 40+ hours/week: Rare; unsustainable long-term without burnout.
Tip: Use time-tracking tools like Toggl or Clockify to log billable hours.
2. Adjust for Weeks Worked
Most freelancers don’t work 52 weeks/year. Common adjustments: - 48 weeks: 2 weeks vacation + 2 weeks holidays/sick leave. - 46 weeks: 4 weeks vacation + 2 weeks buffer for slow periods. - 50 weeks: Only 2 weeks off (not recommended for work-life balance).
Example: A freelancer billing $80/hr for 30 hours/week at 48 weeks earns $115,200/year.
3. Compare Apples to Apples
A $100k salary includes benefits (health insurance, retirement, paid leave). A $100k freelance income does not. Use this rule of thumb:
Freelance rate ≈ (Desired salary × 1.3–1.6) / (Billable hours × Weeks)
Example: To match a $120k salary at 30×48 hours, aim for $83–$100/hr.
Hidden Costs of Freelancing
Freelancers pay for expenses employees don’t. Factor these into your rate:
| Expense | Estimated Annual Cost (USD) | Notes |
|---|---|---|
| Self-employment tax | 15.3% of net income | Social Security + Medicare (US). |
| Health insurance | $3,000–$10,000 | Varies by country and coverage. Shop around for plans on Healthcare.gov (US) or local marketplaces. |
| Retirement savings | $5,000–$20,000 | No employer match; you save 100%. Consider a Solo 401(k) or SEP IRA for tax advantages. |
| Tools/software | $1,000–$5,000 | IDEs (VS Code, JetBrains), cloud hosting (AWS, Vercel), subscriptions (GitHub Pro, Notion). |
| Accounting/legal | $1,000–$3,000 | Tax prep, contract reviews. Tools like LegalZoom can help with LLC setup. |
| Marketing | $500–$3,000 | Website (Squarespace, Webflow), LinkedIn Premium, ads (Google/Facebook). |
| Unpaid admin time | 5–10 hours/week | Invoicing, emails, proposals. Automate with tools like Zapier or Make. |
Tip: Set aside 25–30% of income for taxes. Use apps like QuickBooks Self-Employed to track deductions. Consider hiring an accountant if your income exceeds $50k/year.
Salary vs. Hourly: Which is Better for You?
Choose Hourly If…
✅ You value flexibility (e.g., taking a month off between projects). ✅ Your work is project-based (e.g., web development, consulting). ✅ You want to scale income by raising rates or working more hours. ✅ You’re starting out and need to build a client base.
Choose Salary If…
✅ You prefer stability (predictable paychecks, benefits). ✅ Your role is time-intensive (e.g., 50+ hours/week at a startup). ✅ You hate tracking time or negotiating rates. ✅ You want career growth (promotions, equity, bonuses).
Tip: Hybrid models exist! Some freelancers take 6-month contracts (hourly) with benefits, then reassess. Others work full-time while freelancing on the side to test the waters.
Reverse: Salary → Hourly Rate
Hourly ≈ (Target salary + Hidden costs) / (Billable hours × Weeks)
Example: To replace a $100k salary with $20k in hidden costs: - $120,000 / (30 × 48) = $83/hr (before profit). - Add 20% for profit: $100/hr.
Use this to negotiate rates or evaluate job offers. Always round up to the nearest $5 or $10 to simplify invoicing.
FAQ
1. Is 40 hours/week billable realistic for freelancers? No. Most freelancers bill 25–35 hours/week due to admin work, client meetings, and downtime. Track your time for a month to find your average.
2. Should I use 52 weeks in the calculator? No. Most freelancers use 46–48 weeks to account for vacations, holidays, and sick leave. Using 52 weeks overestimates income.
3. How do taxes affect my take-home pay? Freelancers pay self-employment tax (15.3% in the US) + income tax. Set aside 25–30% of income for taxes. In the US, quarterly estimated tax payments are required if you expect to owe $1,000+ annually.
4. What’s a good hourly rate for a freelance developer in 2026? Rates vary by experience, location, and niche. In the US: Junior: $50–$80/hr, Mid-level: $80–$120/hr, Senior: $120–$200+/hr, Specialized (AI, blockchain): $150–$300+/hr. See Freelance Developer Day Rates 2026 for global benchmarks.
5. How do I negotiate a higher hourly rate? Anchor high (start 20–30% above target), bundle services (e.g., “10 hours/month at $90/hr”), highlight ROI, upsell retainers, and leverage demand (raise rates if booked out).
Tools to Simplify the Math
- Wave Apps (Free invoicing + accounting for freelancers. Best for solopreneurs.)
- FreshBooks (Time tracking + expense management. Ideal for freelancers with multiple clients.)
- Nomad List (Compare cost of living for digital nomads.)
- Bonsai (Contracts, proposals, and invoicing in one place.)
- QuickBooks Self-Employed (Tax-focused accounting. Tracks mileage and estimates quarterly taxes.)
→ Related: Freelance Developer Day Rates 2026 · Freelance Legal Setup Guide · Best Budgeting Apps for Couples 2026