# Health insurance and retirement in your freelance rate

Employers pay or subsidize health insurance and retirement plans. As a freelancer you fund both yourself, so they belong in the revenue you plan for.

## Why they raise your rate

Premiums and retirement contributions come out of your take-home pay budget before you spend a dollar. To keep the same take-home pay, you must earn them on top. They also lower your income tax, which cushions part of the cost.

## Effect on the hourly rate

Health insurance of $450 and retirement of $500 per month lift the rate from $76.74 to $89.05.

Default values, only health insurance and retirement changed:

| Health insurance per month | Retirement per month | Hourly rate |
| --- | --- | --- |
| $0 | $0 | $76.74 |
| $450 | $0 | $82.57 |
| $450 | $500 | $89.05 |
| $900 | $500 | $94.88 |
| $900 | $1,000 | $101.35 |

## How the deductions work

- **Self-employed health insurance deduction:** premiums for you, your spouse and dependents can reduce your income tax. It does not reduce self-employment tax and cannot exceed your net profit.

- **SEP IRA and Solo 401(k):** contributions reduce your income tax. Annual limits depend on the plan and on your profit; see IRS Publication 560.

- **Other savings:** an emergency fund or brokerage account does not reduce tax.

## Frequently asked questions

### Should health insurance be included in my freelance rate?

Yes. Premiums are a real cost of running your business and of staying insured. The calculator adds them to the revenue target and treats them as the self-employed health insurance deduction.

### Do retirement contributions lower my hourly rate?

No, they raise it, because you must earn the contribution. They lower your income tax, which softens the effect, but a dollar saved still has to be earned.

## Sources

- [IRS Publication 560: Retirement plans for small business](https://www.irs.gov/publications/p560)
- [IRS: Self-employment tax (Social Security and Medicare taxes)](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes)

Updated October 2026. Simplified estimate, not tax or legal advice.