How to set your freelance rate (without guessing)
Most freelancers price backwards: they look at what others charge, subtract a little out of insecurity, and hope it works out. The durable method runs the other direction — start from the life you want to fund, then derive the rate. Add up your target personal income, business overhead (software, equipment, insurance, accounting), health premiums, retirement savings, and a self-employment tax buffer. That's the revenue your business must produce.
Then divide by the hours you can actually bill — not 2,080. Subtract weeks off, then apply a realistic utilization rate: proposals, sales calls, invoicing, and marketing routinely consume 20–50% of a freelancer's week. A freelancer targeting $90,000 with normal overhead and 75% utilization usually lands somewhere between $75 and $110 per hour. If that number feels high, that's the point — it's what "cheap" freelancers discover two years too late, after a season of burnout at $45/hr.
The 1099 premium rule of thumb
When a company offers you a contract instead of a salary, the headline number is designed to look generous. It isn't — until it clears the 1099 premium. As a contractor you pay both halves of Social Security and Medicare (~15.3% self-employment tax on 92.35% of net earnings), replace employer-subsidized health insurance, fund 100% of your retirement, and absorb every unpaid holiday, sick day, and bench week between contracts.
The working shortcut: a 1099 rate should carry a 30–50% premium over the W-2 hourly equivalent. Quick math: salary ÷ 1,000 ≈ your minimum contract rate ($120,000 salary → at least $120/hr, since salary ÷ 2,080 ≈ $58/hr × ~1.4 premium, billed over fewer real hours). Contracting does claw some back — the 20% QBI deduction and deductible business expenses are real money — which is why an exact, personalized break-even beats any rule of thumb. That's what the comparator above computes.