Question 1

How is my true hourly rate different from my quoted rate?

Accepted Answer

Your quoted rate is the gross price you charge clients. Your true hourly rate is what you actually take home after deducting self-employment taxes (roughly 15.3% in the US on top of income tax), business expenses like software and insurance, and dividing by your *total* working hours — including unbillable time spent on emails, invoicing, and business development.

Question 2

What counts as an unbillable hour for a freelancer?

Accepted Answer

Any hour you work that no client pays for — answering emails, writing proposals, onboarding new clients, doing your bookkeeping, attending unpaid discovery calls, and marketing yourself. For most freelancers, unbillable hours represent 30–50% of their working week.

Question 3

How much should I raise my rate to account for self-employment taxes?

Accepted Answer

US freelancers pay both the employer and employee halves of FICA (Social Security + Medicare), which together total 15.3% on net self-employment income, on top of regular income tax. A practical rule of thumb is to add at least 25–35% to your baseline break-even rate just to cover this tax gap.

Question 4

Can my true hourly rate be lower than my minimum wage equivalent?

Accepted Answer

Yes — this is surprisingly common. A freelancer charging $60/hr who works 15 unbillable admin hours per 25 billable hours, pays 28% effective taxes, and has $500/month in business expenses can end up with an effective take-home rate below $25/hr.

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