Contractors

Contractor hourly rate calculator

Find the break-even and billed hourly rate that covers the pay you want, annual overhead, and the hours you can actually bill. Use it as a planning floor before you send a quote.

This is a planning estimate, not a wage survey or legal advice. It does not set a prevailing wage, include every tax or license in your trade, or tell you what customers will pay. Compare the result with recent bids in your market.
The amount you want the business to pay you in a year, before personal income tax.
Insurance, shop or office, vehicles, tools, software, marketing, and similar recurring costs. Leave job materials out.
Share of available hours you expect to bill.
Margin is profit ÷ billed rate, not markup. 15% margin equals about 17.65% markup.

How this rate is figured

  1. Annual cost = desired owner pay + overhead + optional 2026 self-employment tax on that owner-pay figure.
  2. Billable hours = weeks worked × hours available per week × utilization.
  3. Break-even hourly rate = annual cost ÷ billable hours. That rate covers costs and owner pay with no leftover profit.
  4. Billed hourly rate = break-even ÷ (1 − target margin). A 15% margin is not a 15% markup; the results show both.

Example: $80,000 pay, $25,000 overhead, 48 weeks, 40 hours, 70% utilization, and a 15% margin. That is 1,344 billable hours and a $78.13 break-even rate. The billed rate is $91.91 per hour. If you bill all 1,344 hours at that rate, planned profit is $18,529.41.

The optional SE tax box uses 2026 IRS rates (12.4% Social Security tax and 2.9% Medicare tax on 92.35% of the owner-pay figure, subject to the $184,500 Social Security wage base). It is a planning shortcut. Actual self-employment tax is based on net profit.

Turn the rate into job estimates you can track

The Contractor Job Costing Tracker ($14) is a spreadsheet for estimates, actual costs, and job profit as the work proceeds. This page only sets a planning rate.

Get the Job Costing Tracker on Gumroad Or buy it on Payhip

Frequently asked questions

How is the hourly rate figured?

Add the annual owner pay you want, annual overhead, and (if you choose) an estimate of 2026 self-employment tax on that owner-pay figure. Divide by billable hours. Billable hours are weeks worked × hours available each week × your utilization rate (the share of those hours you actually bill). The break-even rate covers those costs with no profit. The billed rate then adds your target profit margin: billed rate = break-even ÷ (1 − margin).

What should count as overhead?

Use recurring costs to keep the business running that are not already in owner pay: liability and vehicle insurance, shop or office rent, tools and software, licenses, marketing, unpaid travel, and similar costs. Job materials and subcontractor bills usually belong in the job price, not in this labor rate. If a cost is billed to a specific job, leave it out of overhead here and add it on the estimate.

What is a reasonable utilization rate?

It depends on the trade and how you spend your week. A common planning range for an owner who also estimates, buys materials, and does paperwork is 50–70% of available hours. Using 100% will understate the rate you need, because unpaid time still has to be covered.

Is a 15% margin the same as a 15% markup?

No. Margin is profit ÷ billed rate. Markup is profit ÷ break-even cost. A 15% margin is a 17.65% markup. This page asks for margin and also shows the implied markup. The markup vs. margin calculator walks through the same difference for a full job bid.

Does the optional self-employment tax box replace a tax return?

No. If you check it, the tool estimates 2026 self-employment tax on the owner-pay amount you entered, using the same IRS rates as the SE tax calculator. Actual SE tax is based on net profit, which may be different, and this is not tax advice. You can leave the box unchecked and add a tax reserve in overhead instead.

Will customers pay this rate?

Not necessarily. This is the rate that meets the pay, overhead, and margin you entered. The rate your market will accept can be higher or lower. Use this as a floor for planning, then check it against recent winning bids.