Question 1

What tax rate should US freelancers use?

Accepted Answer

A reasonable default for a US freelancer in the 22% federal bracket with a middle-of-the-pack state is around 30-35% combined. That accounts for federal income tax, state income tax, and the 15.3% self-employment tax (calculated on 92.35% of your net earnings). If you're incorporated as an S-corp and paying yourself a reasonable salary + distributions, your effective rate can be lower. Use your own last-year effective rate if you have it — otherwise 32% is a defensible starting point.

Question 2

How many billable hours should I actually assume?

Accepted Answer

Most freelancers overestimate this and undercharge as a result. A typical working year is ~2,000 hours, but after business development, admin, pitching, invoicing, training, and deep-work planning, genuinely billable time is usually 60-70% of that — 1,200 to 1,400 hours. If you're running a solo consultancy with lots of sales motion, it can drop to 50%. The tool starts from a realistic figure because that's where the rate that actually pays the bills comes from.

Question 3

Should I charge hourly or project-based?

Accepted Answer

The hourly rate you calculate here is your floor for project pricing. For a 40-hour project, your target price is 40 × target_hourly at minimum. Project pricing works best once you can estimate effort accurately — which usually takes a year or two of hourly work first. New freelancers should stay hourly until they have data.

Question 4

Why is this lower than what agencies charge?

Accepted Answer

Agencies typically mark up 2-3x on top of the freelancer's rate to cover account management, sales, bench time between projects, office overhead, insurance, and margin. Your rate as an independent contractor is the rate the agency would pay a freelancer — not the rate they bill the client. If you're comparing, knock 50-70% off the agency day rate to get the solo-freelance equivalent.

Question 5

What's the difference between the floor rate and the target rate?

Accepted Answer

The floor rate is the break-even number — charge below this and you're subsidising your clients. The target rate is what you should actually pitch: floor plus a buffer (default 20%) for slow months, unexpected expenses, and retirement savings. If you always quote your floor, you're one bad quarter away from a cash-flow problem. Quote the target rate and negotiate down from there if needed — not up.

Question 6

Is this tool free to use?

Accepted Answer

Yes — completely free, no sign-up, no account. TimeIsMoney.tools is supported by minimal, non-intrusive advertising. Nothing you enter leaves your browser.

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