A Comprehensive Tax Deductions List for the Self-Employed

For tax purposes, “self-employed” includes independent contractors, freelancers, and individuals operating a business as a sole proprietor or partner. If you run a business intending to make a profit, you are considered self-employed. The foundation of tax deductions is that an expense must be both “ordinary and necessary.” An ordinary expense is common in your industry, while a necessary expense is helpful and appropriate for your business.

Common Operating Expense Deductions

Many costs from running a business can be deducted on Schedule C, the form used to report profit or loss. These deductions lower your total taxable profit. Common deductible expenses include:

• Office supplies like paper, pens, and ink cartridges, which are fully deductible in the year of purchase.
• Business insurance premiums for policies such as general liability, professional liability, and property insurance.
• Fees paid for professional and legal services from accountants, bookkeepers, or attorneys for business matters.
• Advertising and marketing costs, including digital ad campaigns, website hosting fees, and printed materials like business cards.
• Bank fees associated with a business checking or credit card account.
• Software and online subscriptions used for business purposes.
• Business licenses, regulatory fees, and memberships in professional associations related to your work.

Business travel expenses are deductible when a trip is primarily for business and requires you to rest or sleep. Deductible costs include transportation like airfare, lodging, and rental cars. You can deduct 50% of the cost of a meal with a client or associate if it has a clear business purpose. This 50% limit also applies to meals while traveling for business.

For telephone and internet expenses, you can only deduct the business-use percentage. This requires allocating the total cost between your personal and business use. Education and professional development costs can be deducted if the training maintains or improves skills for your existing business, not if it qualifies you for a new one.

Startup costs are treated differently. The IRS allows you to deduct up to $5,000 in business startup costs in your first year of business. Any costs above this initial deduction must be amortized, or spread out, over a period of 180 months.

Home Office and Vehicle Use Deductions

Deductions for the business use of your home and personal vehicle are available but have specific rules. For the home office deduction, the primary requirement is the “exclusive and regular use” test. This means a specific area of your home must be used solely for your business on an ongoing basis. An office that also serves as a guest room, for example, would not meet this test.

There are two ways to calculate the home office deduction. The Simplified Method allows you to deduct a standard amount of $5 per square foot of the office, up to a maximum of 300 square feet. This method is straightforward and requires minimal calculation.

The Actual Expense Method can result in a larger deduction but requires detailed records. With this method, you calculate the percentage of your home used for business and apply it to various home expenses. These include direct expenses that apply only to the office, like repairs, and indirect expenses like a portion of your mortgage interest, insurance, utilities, and property taxes. You must file Form 8829 to claim the deduction using this method.

For vehicle use, you also have two calculation methods. The Standard Mileage Rate allows you to deduct a set amount for each business mile driven, which is 70 cents per mile for 2025. This rate accounts for gas, insurance, and general wear and tear. To use this method, you must maintain a mileage log detailing the date, purpose, and miles of each business trip.

The Actual Expense Method involves tracking all costs of operating your vehicle for the year, including gas, oil changes, repairs, tires, insurance, and depreciation. You then calculate the percentage of miles driven for business versus personal use and apply that percentage to your total vehicle costs. This method requires tracking all receipts and service records for your vehicle.

Deductions for Personal Benefits

Self-employment provides access to deductions for certain personal benefits not available to employees. One of the most impactful is the self-employed health insurance deduction. You can deduct 100% of the premiums paid for medical, dental, and qualifying long-term care insurance for yourself, your spouse, and your dependents. You cannot take this deduction for any month you were eligible to participate in a health plan subsidized by an employer, either your own or your spouse’s.

Another deduction is for contributions to a self-employed retirement plan, such as a SEP IRA, SIMPLE IRA, or a Solo 401(k). For a SEP IRA, you can contribute up to 25% of your net adjusted self-employment income, not to exceed $70,000. These contributions can significantly lower your current tax bill.

A Solo 401(k) allows for both an “employee” and an “employer” contribution from you. As the employee, you can contribute up to $23,500, with an additional catch-up contribution of $7,500 if you are age 50 or older. As the employer, you can contribute up to 25% of your net adjusted self-employment income, though combined contributions cannot exceed $70,000.

Major Tax-Specific Deductions

Certain deductions are unique to your tax situation and are claimed as “adjustments to income.” These are taken directly on Schedule 1 of Form 1040 and reduce your adjusted gross income (AGI). This category includes the personal benefit deductions mentioned previously as well as tax-specific calculations.

A primary deduction is for one-half of your self-employment (SE) tax. SE tax is the equivalent of Social Security and Medicare taxes for employees. As a self-employed individual, you pay both the employer and employee portions, totaling 15.3% on your net earnings. The tax code allows you to deduct the “employer” portion, which is half of the total SE tax you pay, calculated on Schedule SE.

Another deduction is the Qualified Business Income (QBI) deduction, also known as the Section 199A deduction. This allows eligible self-employed individuals to deduct up to 20% of their qualified business income, which is the net profit from your business. This deduction is available for owners of sole proprietorships, partnerships, and S corporations. The QBI deduction has limitations based on your taxable income and the nature of your business, particularly for a “specified service trade or business” like health, law, or consulting.

Recordkeeping for Deductions

Maintaining organized records is fundamental to substantiating your tax deductions. In an IRS audit, the burden of proof is on you to show that your claimed expenses were legitimate. Without proper documentation, deductions can be disallowed, leading to additional taxes and penalties.

You must keep records like receipts, bank and credit card statements, and canceled checks. These should be organized by year and expense category. For vehicle expenses, you must maintain a detailed mileage log that records the date, destination, business purpose, and miles driven for each trip. For business travel and meal expenses, your records should document the amount, date, place, and business purpose, as well as the business relationship of the people involved.

You should keep all tax-related records for at least three years from the date you file your return. Records related to business assets should be kept until the period of limitations expires for the year in which you dispose of the property.