What Tradespeople Actually Make Per Hour After Expenses
Ask a tradesperson what they make per hour and they will say their billing rate. Ask them what they actually keep per hour after truck, insurance, fuel, tools, admin time, and slow weeks — and most cannot answer. Here is how to find the real number.
The Billable Hour Problem
There are 2,080 working hours in a year. Most tradespeople bill 1,000–1,400 of them. The rest is driving to jobs, quoting, picking up materials, doing paperwork, handling callbacks, and sitting through slow weeks in January. If you use 2,080 as your denominator when calculating your rate, your true hourly looks much better than it is. The real number is ugly and useful.
What Actually Counts as Overhead
Truck: payment or depreciation, fuel, insurance, registration, maintenance. A work truck costs $15,000–$25,000/year fully loaded for a solo operator. Insurance: general liability, workers comp if you have employees, health insurance if self-employed. Tools: small tool replacement runs $2,000–$5,000/year for most trades. Phone, software, licensing, continuing education. Accounting. Add it up. For a solo tradesperson, $40,000–$70,000 in annual overhead before paying yourself is normal.
The Calculation
True hourly = (billing rate × billable hours − overhead) ÷ billable hours
Example: $110/hr billing rate × 1,200 billable hours = $132,000 revenue. Minus $55,000 overhead = $77,000 before taxes. Divided by 1,200 hours = $64.17 true hourly rate before income and self-employment tax.
After 25–30% effective tax rate: $45–$48/hr take-home. That is the real number for a $110/hr billing rate with typical overhead.
What This Means for Your Rate
If you want to take home $80,000/year after taxes, work backwards: $80,000 ÷ 0.72 (after 28% tax) = $111,000 net income needed. Plus $55,000 overhead = $166,000 revenue needed. Divided by 1,200 billable hours = $138/hr billing rate needed. Not $110.
Use the True Hourly Rate Calculator to run this calculation with your actual numbers — overhead, billable hours, target income, and tax rate. Most tradespeople who run this find they need to raise their rate by $15–$30/hr to hit their income goals.
Frequently Asked Questions
How do you calculate your true hourly rate as a tradesperson?
True hourly rate = (Annual revenue − all overhead costs) ÷ billable hours. Overhead includes truck payment, insurance, fuel, tools, phone, software, training, and unbillable time (driving, quoting, admin). Most tradespeople bill 1,000–1,400 hours per year out of 2,080 working hours.
What is the difference between billing rate and true hourly rate?
Your billing rate is what you charge customers. Your true hourly rate is what you keep after overhead. A plumber billing $125/hr with $60,000 in annual overhead and 1,200 billable hours keeps ($125 × 1,200 − $60,000) ÷ 1,200 = $75/hr before taxes. That is a significant difference.
How many billable hours do tradespeople actually work per year?
Out of 2,080 working hours (52 weeks × 40 hours), tradespeople typically bill 1,000–1,400 hours. The rest is driving, quoting, purchasing, admin, callbacks, warranty work, and slow periods. Using 2,080 as your denominator makes your true rate look much better than it is.
What overhead costs do most tradespeople forget to count?
Common forgotten costs: truck depreciation (not just payment), small tool replacement ($2,000–$5,000/year), continuing education and license renewal, unbillable callback and warranty time, slow season revenue loss, and health insurance if self-employed. These alone add $15,000–$30,000 to annual overhead.