Why 'divide my old salary by 2,080' is the wrong formula
The most common freelance pricing mistake is taking a former salary and dividing by 2,080 (40 hours × 52 weeks). That number assumes you bill every hour you work, never take time off, and have no business costs — none of which is true. A W-2 salary also comes with an employer paying half your Social Security and Medicare tax and covering software, equipment and insurance; as a freelancer, all of that shifts onto you.
The honest starting point is billable hours, not total hours. Most freelancers spend 15–30 hours a week on actual client work and the rest on proposals, admin, marketing, invoicing and skill-building — none of which is billable. If you work 40 hours a week but only 25 are billable, your rate needs to cover the other 15 hours too, or you'll quietly work for free two days a week.
Expenses and taxes both hit before you see the money
Business expenses — software subscriptions, a laptop upgrade, coworking, professional insurance — come out of gross revenue before it's yours to spend, the same as they would for any business. They're easy to underestimate because they're spread across the year rather than arriving as one bill.
Self-employment tax is the other blind spot: 15.3% (Social Security + Medicare, both halves) on top of ordinary income tax. A rough reserve of 25% of gross revenue is a reasonable starting estimate for most single-filer freelancers in a mid tax bracket — high earners or those with state income tax should reserve more, and an accountant can tell you your actual number.
Worked example
Wanting $60,000 take-home, with $300/month in expenses, 25 billable hours a week and 4 weeks off: that's 1,200 billable hours a year (25 × 48 weeks) against a gross revenue need of about $91,600 after the 25% tax reserve. That works out to roughly $76/hour minimum, or about $92/hour with a 20% buffer for slow months, scope creep and the occasional unpaid invoice — a very different number from the naive $60,000 ÷ 2,080 = $29/hour a new freelancer might guess at.