How to calculate your hourly rate

1. Decide what you need to earn

Start with the yearly pay you need, before income tax. A handyman sets $45,000.

2. List your yearly business costs

Insurance $1,800, vehicle $4,200, tools $1,500, phone and software $900, marketing $600: $9,000.

3. Add self-employment tax on your pay

When you work for yourself, you pay both halves of Social Security and Medicare: 15.3% on 92.35% of your earnings in 2026. On $45,000: $45,000 × 0.9235 × 0.153 = $6,358.

4. Add a profit cushion

A business needs money for slow months, repairs and growth. With a 10% cushion, divide the total by 0.90: ($45,000 + $9,000 + $6,358) ÷ 0.90 = $67,065 of revenue needed a year.

5. Count your billable hours honestly

He works 40 hours a week, but driving, quoting, buying parts and bookkeeping aren’t billable. If 60% of his hours are billable and he works 49 weeks: 40 × 0.60 × 49 = 1,176 hours. Track a few weeks to find your own share.

6. Divide

$67,065 ÷ 1,176 = $57.03 an hour. That’s the floor. Charging $35 because that’s what the job paid at a company would leave him working full time for far less than he planned.

7. Turn it into job prices

Estimate the hours, multiply by the rate, then add materials. A 2.5-hour faucet job with $40 of parts: 2.5 × $57.03 + $40 = $182.58, so about $185.

In a spreadsheet

The self-employment tax line is accurate for pay up to $184,500 in 2026, where the Social Security part stops.

Published by Groundwork Business Advisory. Updated October 19, 2026.