True Hourly Rate Calculator (What to Charge)
Most trade pros price off a rate they picked years ago, or copied from a competitor. This calculator works backward from what you actually need to take home, after overhead and taxes, spread across the hours you can realistically bill — not the hours you show up.
True Hourly Rate Calculator
Enter your target take-home pay, overhead, and tax rate. Billable hours defaults to 1,250/year — far below the 2,080 hours in a full work year.
Billable hours are hours you can actually bill a client — not paid hours. Drive time, estimates, admin, and slow weeks all eat into the 2,080 paid hours in a standard work year. This rate is a floor before any markup for skill, demand, or risk.
How the true hourly rate is calculated
Work backward from take-home pay: gross it up for taxes, add overhead, then divide by billable hours — not the 2,080 hours in a paid work year.
| Step | Example: $70k take-home, $15k overhead, 25% tax, 1,250 billable hrs |
|---|---|
| Pretax income needed | $70,000 ÷ (1 − 0.25) = $93,333.33 |
| Add overhead | $93,333.33 + $15,000 = $108,333.33 |
| Divide by billable hours | $108,333.33 ÷ 1,250 = $86.67/hr |
Notice this rate assumes only 1,250 billable hours out of 2,080 paid hours in a year — roughly 60%. That gap is real: drive time, estimates, callbacks, slow weeks, and admin work are all paid time that is not billable to a client.
Contractor Estimate Calculator (Excel & Google Sheets)
Once you know your true hourly rate, build it into every estimate automatically — labor, materials, markup, and profit, all auto-totaled.
Why billable hours are always lower than paid hours
A 40-hour work week is 2,080 hours a year, but very few trade professionals bill anywhere close to that. Estimating, driving between jobs, ordering materials, callbacks, weather days, and slow stretches all consume paid time without generating billable revenue. Most solo operators land between 1,100 and 1,400 billable hours a year — use your own number if you track it.
Next: check your margin and labor burden
Your true hourly rate is the floor — the next step is confirming your markup vs. margin on every job, and reviewing your full labor burden rate so payroll taxes, insurance, and benefits are baked into what you charge, not absorbed out of profit.
Frequently asked questions
What is a true hourly rate?
Your true hourly rate is the minimum you must charge per billable hour to cover your target take-home pay, overhead, and taxes — calculated using realistic billable hours, not the full 2,080-hour paid work year.
Why use billable hours instead of paid hours?
Because billable hours are what actually generate revenue. Using 2,080 paid hours in the calculation would understate your real rate, since drive time, estimating, and admin work are unpaid by the client but still cost you time.
Is my true hourly rate the same as my price to the customer?
No — it is a floor. Add markup for skill, demand, risk, and profit margin on top of this number before quoting a customer.
Is this hourly rate calculator free?
Yes — free, no sign-up. Enter your take-home target, overhead, tax rate, and billable hours to see the rate you need to charge.