What Can You Write Off as an Independent Contractor?

As an independent contractor, you operate as your own business. This status provides the flexibility to deduct various expenses incurred in your work, a benefit not available to traditional employees. These deductions lower your total taxable income, which reduces the amount of tax you owe. Understanding which expenses qualify and keeping careful records allows you to accurately reflect your true profit.

The “Ordinary and Necessary” Expense Rule

The foundation of all business deductions rests on a principle that an expense must be both “ordinary and necessary.” An “ordinary” expense is one that is common and accepted within your specific trade or industry. For example, a freelance writer purchasing a subscription to a grammar-checking software is an ordinary expense.

A “necessary” expense is one that is helpful and appropriate for your business, though it does not have to be indispensable. For instance, a professional photographer buying a new lens to improve their work is a necessary expense. An expense must meet both criteria to be deductible. For example, while a new laptop may be a necessary tool for a software developer, an excessively luxurious model might be questioned as not being ordinary.

Common Write-Offs for Independent Contractors

Home Office Expenses

For many independent contractors, their home serves as their primary place of business. The IRS allows for a deduction of home office expenses, provided the space is used regularly and exclusively for business activities. There are two methods for calculating this deduction: the simplified method and the actual expense method.

The simplified method offers a straightforward way to calculate your deduction. You can deduct $5 per square foot of your home office, up to a maximum of 300 square feet. This method is less burdensome, as you do not need to track individual home expenses.

The actual expense method, while more complex, can result in a larger deduction. This method allows you to deduct a percentage of your actual home expenses, such as mortgage interest, rent, utilities, and repairs. The percentage is determined by the proportion of your home that is used for your business.

Vehicle Use

If you use your personal vehicle for business-related travel, you may be able to deduct the associated costs. Commuting from your home to your primary workplace is not considered a deductible expense. The IRS provides two methods for this deduction.

The standard mileage rate is a simplified approach that allows you to deduct a set amount for each business mile you drive. The IRS sets this rate annually; for 2025, it is 70 cents per mile. To use this method, you must maintain a detailed log of your business mileage, including the date, purpose, and distance of each trip.

The actual expense method involves tracking all of your vehicle-related costs, such as gasoline, oil changes, insurance, and depreciation. You can then deduct the portion of these expenses that corresponds to the business use of your vehicle.

Supplies and Materials

The costs of supplies and materials that are ordinary and necessary for your business are fully deductible. This can include general office supplies like paper and pens or specialized materials required for your trade. Subscriptions to industry publications, professional journals, and online resources that help you stay current in your field are also deductible.

Communication and Utilities

You can deduct the business-use portion of your cell phone and internet bills. If you have a dedicated phone line or internet connection solely for your business, you can deduct the full cost. If you use the same services for both personal and business purposes, you can only deduct the percentage attributable to your business use. It is advisable to keep itemized bills to support your allocation.

Marketing and Advertising

Any costs you incur to promote your business and attract new clients are deductible. The goal of these expenditures is to generate income for your business, making them a necessary part of your operations. Deductible marketing expenses include:

• Creating and maintaining a website
• Printing business cards and flyers
• Running online advertising campaigns
• Attending trade shows
• Sponsoring local events

Business Travel and Meals

When you travel for business, you can deduct many of the associated costs, including airfare, lodging, and transportation at your destination. To qualify, the trip must be away from your “tax home” and last longer than a typical workday, requiring you to rest or sleep. The cost of meals while on business travel is also deductible, but you can only deduct 50% of the cost. This 50% limitation also applies to meals with clients or colleagues, even when not traveling.

Health and Retirement Savings Deductions

Self-Employed Health Insurance Deduction

A deduction available to independent contractors is for health insurance premiums. You may be able to deduct 100% of the premiums paid for medical, dental, and qualified long-term care insurance for yourself, your spouse, and your dependents. This deduction is taken as an adjustment to your income.

You cannot claim the deduction for any month you were eligible to participate in a health plan subsidized by an employer, either your own or your spouse’s. The deduction also cannot exceed the net profit from your business.

Retirement Plan Contributions

As an independent contractor, you are responsible for your own retirement savings, and contributions to certain plans are tax-deductible. This allows you to save for the future while reducing your current taxable income. Common retirement plans for self-employed individuals include:

• A Simplified Employee Pension (SEP) IRA allows you to contribute up to 25% of your net adjusted self-employment income, not to exceed $74,000 for 2025.
• A solo 401(k) is for business owners with no employees other than a spouse and allows for both “employee” and “employer” contributions, with a combined limit of $74,000 for 2025.
• A Savings Incentive Match Plan for Employees (SIMPLE) IRA is suitable for small businesses and has a contribution limit of $17,000 for 2025.

Essential Recordkeeping for Your Deductions

Proper recordkeeping is required to substantiate your deductions in an IRS audit. Your system should capture all business income and expenses. Keep all receipts, either digitally or physically, for any expense you plan to deduct.

Using a separate bank account and credit card for your business avoids mixing personal and business funds, which simplifies tracking. The IRS requires you to keep records for at least three years from the date you file your tax return.

Reporting Expenses on Your Tax Return

For most independent contractors, business expenses are reported on Schedule C (Form 1040), “Profit or Loss from Business.” This form is used to calculate your net profit or loss from your business. Part I of Schedule C is for your gross income, while Part II is where you list your business expenses in categories such as advertising, supplies, and travel.

Some deductions require their own forms. For example, the home office deduction may require Form 8829, and depreciating assets requires Form 4562. The totals from these are then transferred to Schedule C.

This net profit or loss is then transferred to your Form 1040 and is used to determine your overall tax liability and your self-employment tax on Schedule SE.