Your Hourly Rate Is Not Your Take Home

$100/hr sounds great until you do the real math. Here's what freelancers actually keep.

You set your rate at $100 an hour. You tell people you charge $100 an hour. You feel good about $100 an hour. But $100 an hour is not what you make.

If you're a freelancer, a 1099 contractor, or any kind of self employed professional, your hourly rate and your actual take home are two very different numbers. Here's why.

The 30% That Disappears Immediately

When you work a W2 job, your employer pays half of your Social Security and Medicare taxes. When you're self employed, you pay both halves. That's 15.3% right off the top.

Add federal income tax (somewhere between 12% and 24% depending on your bracket), state income tax if applicable, and your effective tax rate as a freelancer is roughly 25% to 35% of your gross income.

Your $100/hr just became $65 to $75/hr. And we haven't subtracted anything else yet.

The Overhead Nobody Talks About

As a W2 employee, your employer pays for your health insurance, your retirement match, your laptop, your software, and your office. As a freelancer, all of that comes out of your pocket.

Add it up and your monthly overhead as a freelancer is somewhere between $1,000 and $2,000. That's $12,000 to $24,000 per year that comes out before you take a dollar home.

You Don't Bill 40 Hours a Week

This is the part most freelancers don't account for when they set their rate. You spend time on proposals, invoicing, bookkeeping, marketing, admin, client calls that aren't billable, and chasing late payments. That time is real. It's work. And nobody pays you for it.

Most freelancers bill between 25 and 30 hours per week. Not 40. If you're billing 30, you're doing well. If you're billing 20, you need to either raise your rate or find more clients.

The Real Math

That's the real number. $76,000 on a $100/hr rate. Not bad. But it's not $200,000, which is what $100/hr times 2,000 hours looks like on paper.

The gap between $200,000 and $76,000 is taxes, overhead, and unbillable hours. Every freelancer needs to understand this gap before they set their rate.

What This Means for Your Rate

Work backwards. Start with what you need to take home. Add your taxes. Add your overhead. Divide by your realistic billable hours. That's your rate.

If you need $100,000 take home, your gross needs to be roughly $155,000. At 28 billable hours per week for 48 weeks, that's $115/hr. Not $100.

Most freelancers set their rate based on what feels right or what they think the market will bear. The ones who actually make money set their rate based on math.