One of the genuine financial advantages of self-employment is access to business deductions that employees cannot claim. Used correctly, these deductions reduce both your income tax and your self-employment tax. Used incorrectly -- or not at all -- you overpay significantly. Here is every deduction worth knowing, with the specific rules that determine whether your situation qualifies.
Home Office Deduction
If you use part of your home regularly and exclusively for business, you can deduct a portion of home expenses. The two methods:
- Simplified method: $5 per square foot of dedicated office space, up to 300 square feet ($1,500 maximum). No depreciation recapture when you sell your home.
- Regular method: Deduct the percentage of your home used for business (office square footage / total home square footage) applied to actual home expenses: rent or mortgage interest, utilities, insurance, repairs, and depreciation. More complex but often produces a larger deduction for larger offices or expensive homes.
The "exclusive use" rule is strict: a room used for both your office and a guest bedroom does not qualify. A dedicated room used only for work qualifies fully.
Vehicle and Mileage
Two methods -- choose the one that produces the larger deduction:
- Standard mileage rate: $0.70 per business mile driven in 2026. Track every business trip: client meetings, picking up supplies, business travel to other work locations. Commuting (home to regular workplace) never qualifies.
- Actual expense method: Deduct the business-use percentage of actual vehicle costs: gas, insurance, maintenance, depreciation, registration. Requires tracking the percentage of total miles that were business-related.
Health Insurance Premiums
Self-employed individuals who are not eligible for employer-sponsored coverage (their own or a spouse's) can deduct 100% of health, dental, and long-term care insurance premiums for themselves and their family. This is an above-the-line deduction -- it reduces AGI directly.
Retirement Plan Contributions
- SEP-IRA: Up to 25% of net self-employment income, maximum $70,000 in 2026. Simple to set up, generous limits, contributions can be made until the tax filing deadline including extensions.
- Solo 401(k): Employee contributions up to $23,500 ($31,000 if 50+), plus employer contributions up to 25% of net SE income, combined maximum $70,000. More complex but higher potential contributions for lower-income self-employed workers.
- SIMPLE IRA: Up to $16,500 ($20,000 if 50+). Available only if you have no other retirement plan and no more than 100 employees.
Business Expenses
- Software and subscriptions: Business-related software, cloud services, professional databases, and tools used in your work.
- Professional development: Courses, books, conferences, and training directly related to your current business -- not a new career.
- Business travel: Flights, hotels, and 50% of meals when traveling away from your tax home for business. Personal vacation days during a business trip are not deductible.
- Business meals: 50% of meals with clients or business associates where business is discussed. Keep records of who was present and the business purpose.
- Equipment and technology: Computers, cameras, phones, and other equipment used for business. Can be fully expensed in the year of purchase under Section 179 or bonus depreciation.
- Internet and phone: The business-use percentage of your internet and phone bills. If you use your phone 70% for business, deduct 70% of the bill.
- Professional services: Accountant fees, legal fees, and other professional services related to your business.
- Bank fees and payment processing: Business bank account fees, credit card processing fees (Stripe, PayPal, etc.).
What You Cannot Deduct
- Personal expenses, even if you use your work computer occasionally for personal tasks
- Clothing, unless it is a uniform or protective equipment required for the job and not suitable for everyday wear
- Commuting expenses
- Fines and penalties
- Political contributions
Good recordkeeping is what turns legitimate expenses into actual deductions. Keep receipts, note the business purpose of each expense, and track mileage contemporaneously. Our Self-Employment Tax Calculator shows how deductions reduce your SE tax and income tax simultaneously.
Deductions That Freelancers Commonly Miss
Most freelancers know they can deduct obvious expenses like a laptop or software subscription. But many miss significant deductions that are fully legitimate — reducing both federal income tax and SE tax simultaneously.
Home Office Deduction
If you use part of your home exclusively and regularly for business, you can deduct a proportional share of housing costs. The two methods:
- Simplified method: $5 per square foot of dedicated office space, up to 300 square feet ($1,500 maximum). No depreciation recapture risk and easy to calculate.
- Regular method: Calculate the percentage of your home used for business and apply it to actual costs — rent, utilities, insurance, repairs, and for homeowners, depreciation. More work but often a larger deduction.
Self-Employed Health Insurance
If you're self-employed and not eligible for employer-sponsored health coverage through a spouse, you can deduct 100% of health insurance premiums paid for yourself, your spouse, and dependents. This is an above-the-line deduction — it reduces your AGI directly and doesn't require itemizing. It doesn't reduce SE tax, but it meaningfully reduces income tax.
Retirement Contributions
Solo 401(k) and SEP-IRA contributions are among the most powerful deductions available to freelancers. A SEP-IRA allows contributions up to 25% of net self-employment income (2025 cap: $70,000). The contribution is a business deduction that reduces net profit — and therefore both income tax and SE tax. A Solo 401(k) also allows an employee-side contribution of up to $23,500 on top of the employer contribution.
Professional Development, Subscriptions, and Insurance
Courses, certifications, books, and subscriptions that maintain or improve skills used in your current business are fully deductible. Professional liability (E&O) insurance, trade journals, industry publications, and professional software subscriptions are also deductible. Note: education to qualify for a new career is not deductible — only education that maintains or improves existing business skills qualifies.
Business Interest and Bank Fees
If you have a dedicated business bank account, the fees are deductible. Interest on business loans and credit cards used for business expenses is also fully deductible as a business expense — reducing your net profit and your SE tax along with it.
See our SE tax calculator to see how reducing your net profit through these deductions directly lowers your SE tax burden, and our SE tax rate guide for the full rate breakdown.