Freelance Business

Take your target annual income, add business expenses, add self-employment and income taxes, divide by billable hours per year. Most freelancers underestimate by 30-50% because they forget taxes, expenses, and non-billable time. This calculator does the math for you.

Most freelancers bill 20-25 hours per week out of a 40-hour work week. The rest goes to admin, marketing, invoicing, and business development. If you bill 40 hours, you're probably undercharging or working unsustainable hours.

Most successful freelancers aim for a 40-60% profit margin (after taxes and business expenses). If you're below 30%, you're either undercharging or over-spending. Below 15% and you're essentially working for free after considering the risks of self-employment.

Track everything: software subscriptions, home office, phone/internet, professional development, marketing, travel, equipment, coworking space, health insurance, retirement contributions, and professional services (accountant, lawyer). These all reduce your taxable income.

Aim for 15-20% of net income. Since you don't get an employer match, you may need to save more than traditional employees. A SEP IRA lets you save up to 25% of net self-employment income (up to $70,000 in 2026). A Solo 401(k) allows even more with employee + employer contributions.

SEP IRA: Simplest, contribute up to 25% of net SE income (up to $70k). Solo 401(k): Highest potential contributions with employee + employer portions, plus Roth option. Traditional/Roth IRA: Lower limits but Roth provides tax-free withdrawals. Most freelancers use a SEP IRA for simplicity or a Solo 401(k) for maximum savings.