How to use the freelancer take home calculator
- Choose whether your figures are per month, week or year.
- Enter the revenue you collected and your business expenses.
- Choose whether set-asides apply to revenue or to revenue minus expenses, then list each set-aside with the percent you want to keep aside, such as taxes and retirement.
- Read the take-home for the period, what it adds up to over a year and the amount in each set-aside.
Formula
Profit = revenue - business expenses
Set-aside amount = base x percent / 100, where base is revenue or profit
Take-home = revenue - business expenses - total set-asides
Take-home per hour = take-home / hours worked
The percentages are chosen by you. The tool has no tax rates built in.
A month with $8,000 of revenue
Revenue is $8,000 and business expenses are $800, so profit is $7,200. Set-asides of 25% for taxes and 5% for retirement apply to profit, so $1,800 and $360 are set aside, $2,160 in all. Take-home is $8,000 - $800 - $2,160 = $5,040, which is 63% of revenue and $60,480 at the same pace for a year.
With no expenses and one 30% set-aside, $8,000 of revenue leaves $5,600. The percentages in these examples are only examples, not suggestions for what you should set aside.
Why the percentages are yours
How much of freelance income to save for taxes depends on your total income, deductions, state, filing status and whether you owe self-employment tax. A single number cannot be right for everyone, so this tool asks you to enter your own.
A tax professional can tell you what to set aside, and many freelancers also pay estimated taxes during the year. Setting money aside as you are paid keeps tax bills from being a surprise.
Other uses
You can use the rows for anything you want to keep aside, such as a health insurance fund, a slow-season cushion or equipment savings. They are all treated the same way.
To find the rates you need to reach an income goal use the freelance rate calculator. The self-employment tax calculator shows one part of the tax picture, and the contractor vs employee pay calculator compares the two ways of being paid.
Assumptions and limits
- Revenue is money you have collected for the period.
- Every set-aside is a percent of the same base, which is either revenue or revenue minus expenses.
- The percentages you enter are your own choices and are not tax advice.
- Taxes owed, deductions, payment timing and unpaid invoices are not modeled.
Frequently asked questions
How much should a freelancer set aside for taxes?
That depends on your income, deductions, location and filing status, and the tool does not suggest a figure. A tax professional can tell you what fits your situation.
What is the difference between the two bases?
Revenue minus expenses applies the percentages to profit, which many people use for taxes. Revenue applies them to every dollar collected, which gives a more cautious result.
Can I use it for something other than taxes?
Yes. Each row is just a percent kept aside, so you can add retirement, health insurance or a savings buffer. Take-home is what remains after all of them.
Why show take-home per hour?
It turns a monthly figure into pay for the time you worked. Enter the hours worked in the same period and the tool divides take-home by them.