What do I charge, and what do I actually keep?

Start from the total you need to bill, not from what you used to earn. Add your target take-home and your annual business expenses, divide by one minus your total tax reserve, and divide that by the hours you genuinely bill in a year. The figure that comes out is a floor: below it you are subsidising the client. What to charge above the floor is a question about value and market, not arithmetic.

Because an employee’s hourly cost to a company is far more than the salary line. As a freelancer you carry the employer half of payroll tax, health insurance, paid time off, equipment, software, sick days, retirement contributions and every unbillable hour. A rough sanity check that has survived decades: a defensible freelance rate is often two to three times the raw hourly equivalent of the salary you would accept for the same work.

For most solo freelancers, 20 to 30 out of a 40-hour week. The rest goes to finding work, quoting, invoicing, chasing payment, admin and the gaps between projects. Agencies plan around 60 to 75% utilisation for exactly this reason. If your rate assumes 40 billable hours, the first quiet month reveals the error.

It is Social Security and Medicare for people without an employer. An employee pays 7.65% and the employer pays a matching 7.65%; self-employed, you are both, so you pay 15.3%. It is charged on 92.35% of net profit, which approximates the employer-side deduction an employee never sees, and half of what you pay is then deductible against income tax.

Yes for Social Security, no for Medicare. The 12.4% Social Security portion only applies up to the annual wage base, set by the Social Security Administration each October — this hub defaults to $184,500 and leaves it editable. The 2.9% Medicare portion has no ceiling, and higher earners owe an additional 0.9% Medicare surtax that this estimate does not model.

Self-employment tax kicks in at $400 of net profit. Below that, no SE tax is owed — but the income still gets reported on Schedule C, and it can still be subject to income tax as part of your overall return. "I did not get a 1099" is not the test; income is reportable whether or not a form arrives.

A common working rule is 25 to 35% of profit, and the tax case here replaces the rule with your actual numbers. Move it out of the operating account the day the payment clears rather than at quarter end. The failure mode is never the calculation — it is spending money in March that belonged to the IRS in January.

Roughly April 15, June 15, September 15 and the following January 15, on Form 1040-ES. They are not optional for most self-employed people: underpay through the year and a penalty is added even if you pay the full balance by the April deadline. Safe-harbour rules — paying 100% or 110% of last year’s total tax — are the usual way to avoid it when this year’s income is unpredictable.

IRC §199A lets many pass-through businesses deduct up to 20% of qualified business income. This estimate applies a flat 20% of profit minus the half-SE deduction when you select it. Real eligibility is narrower: it phases out above income thresholds and is restricted for specified service trades such as health, law, accounting and consulting. Treat the result as the optimistic case and confirm eligibility before you count on it.

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming levy no broad tax on earned income — enter 0% for the state rate. Note that this only covers state income tax. City and county income taxes exist in several states, and none of them are modelled here.

Multiply headcount by duration by loaded hourly cost. An hour with eight people whose salaries average $7,000 a month is roughly $320 of labour at base pay, and closer to $400 once benefits and overhead are loaded in. Repeated weekly, that is a five-figure annual line item that never appears in any budget review.

If the meeting is work — discovery, review, direction, decisions — it is billable and belongs in your billable-hours count. If it is sales, it is an unbillable cost of doing business and belongs in the gap between hours worked and hours billed. Being clear about which is which is what keeps the rate calculation honest.