To differentiate between billable and non-billable hours in a labor quote template, first, identify the tasks directly related to the project and those not. Any time spent on tasks not directly related to the project should be considered non-billable hours. On the other hand, billable hours include time spent on specific project-related duties such as research, analysis, design, development, and testing. Separating and labeling these hours in the labor quote template is essential to avoid confusion and ensure accurate invoicing.