Top 12 tax deductions for self-employed individuals

Fortunately, there are lots of tax deductions for self-employed individuals. These deductions lower your tax liability and reduce how much you owe. Self-employed tax deductions are available to 1099 independent contractors, sole proprietors, single-member limited liability companies (LLCs), and other workers who meet the requirements.

In this guide, we’ll highlight some of the most common tax deductions for independent contractors and explain how to claim them on your tax return.

If you operate your business from home, you can take the home office deduction. To qualify for this tax deduction, you must use part of your home for business exclusively, and on a regular basis. You can’t take this tax deduction if you work from home occasionally.

There are two ways to calculate your home office tax deduction:

• Simplified Method: Deduct $5 per square foot, up to 300 square feet.
• Regular Method: Deduct the operating expenses based on the percentage of your home used for business.

You can record your home office deduction on Schedule C (Form 1040), Line 30.

Self-employed individuals are required to pay a self-employment tax, which includes the employee portion and the employer portion of Social Security tax and Medicare tax.

The IRS allows self-employed people to deduct the employer-equivalent portion (50%) of their self-employment tax when calculating adjusted gross income (AGI).

To claim the self-employment tax deduction, fill out Schedule SE to calculate the self-employment tax. Then, enter the deductible amount on Schedule 1 (Form 1040), Line 15.

Many business expenses can be deducted from your self-employed income taxes. Some common examples of deductible business expenses include:

• Office supplies (e.g., paper and pens)
• Software and subscriptions
• Equipment purchases (e.g., computers, printers, and cell phones)

There’s only one requirement for this deduction—your business must have used the items during the taxable year. While it helps to have receipts for these expenses, you can still take the deduction if you didn’t keep track of your purchases.

When you file your taxes, you can deduct your business expenses on Schedule C (Form 1040), Line 18.

Another category of business expenses that qualify for a tax deduction are business insurance premiums, such as:

• General liability insurance
• Business owner’s policy (BOP)
• Professional liability insurance

Business insurance premiums should be deducted on Schedule C (Form 1040), Line 15.

The IRS allows self-employed small business owners to deduct vehicle expenses and mileage. However, the costs you can deduct and the amount depends on how the vehicle is used.

If you use the vehicle for business purposes only, you’re allowed to deduct the entire cost of ownership, up to a certain amount. This includes lease payments, gas, registration fees, tolls, repairs, and commercial auto insurance premiums.

If you use the vehicle for personal use and business use, you can only deduct the cost of business use. For example, this might include the cost of gas when driving to a client meeting.

There are several ways to deduct the cost of business use for your vehicle:

• Standard mileage rate: Deduct a set rate per mile driven for business purposes.
• Actual expense method: Deduct actual vehicle expenses proportional to business use.

The deduction for vehicle and mileage can be reported on Schedule C (Form 1040), Part IV.

You’re allowed to deduct the cost of business travel as a self-employed individual. You can also deduct the travel expenses you pay for employees. Some examples of travel costs that qualify for this deduction include:

• Transportation (e.g. train tickets, airfare, and rental cars)
• Lodging
• Other travel-related expenses

You can also deduct business-related meals. Typically, you can write off 50% of the cost of all meals during business trips.

If you want to deduct travel and meal costs, it’s important to keep your receipts. Good recordkeeping will help you figure out exactly how much you can deduct at the end of the year.

When you file your taxes, you’ll need to fill out Schedule C (Form 1040), Line 24a for travel and Line 24b for meals.

If you participate in continuing education or professional development courses, those costs can be deducted from your business taxes. Some examples of deductible education expenses include:

• Courses and training programs related to your business
• Books and industry-related materials
• Certain transportation and travel expenses (e.g. transportation to a conference)

Not all professional development expenses qualify for the tax deduction. In general, the education courses must meet two criteria:

• Education should be necessary to keep your current job or salary.
• Education must help maintain or improve skills needed in your present work.

The education and professional development deduction should be recorded on Schedule C (Form 1040), Line 27a under “other expenses.”

As an independent contractor or freelancer, marketing and advertising can be a good investment for your business. You can deduct these expenses from your taxes, as long as they’re ordinary and necessary.

You can deduct marketing and advertising costs like:

• Website development and hosting costs
• Advertising expenses, including online ads and business cards
• Social media management services
• Billboard advertisements

To claim the advertising and marketing tax credit, you can report your expenses on Schedule C (Form 1040), Line 8.

If your business used professional services during the taxable year, those expenses may qualify as a tax deduction. You can typically deduct fees paid to:

• Lawyers
• Accountants
• Business consultants
• Public relations agencies
• Hiring firms
• Tax professionals

When filling out your tax return, report these costs on Schedule C (Form 1040), Line 17.

The depreciation of business assets over the course of their useful lifespan can be deducted, up to a specific limit. This deduction applies to tangible and intangible business property, including:

• Real estate (excluding land)
• Vehicles
• Business equipment
• Machines
• Patents
• Software

There are two special rules that can help with this deduction:

• Bonus depreciation: For 2024, you can deduct 60% of the asset’s cost if you bought it in that year. The rest can be depreciated normally.
• Section 179 expensing: This rule allows you to deduct part, or all, of the cost of certain assets bought for business use in the same year.

For 2024, the maximum deduction under Section 179 is $1,220,000, but this decreases if your total property cost exceeds $3,050,000. It’s important to note that the total deduction cannot be more than your business’s taxable income for the year.

Depreciated business assets can be written off using Schedule C (Form 1040), Line 13.

The qualified business income (QBI) deduction allows eligible self-employed individuals to deduct up to 20% of their QBI for the taxable year. It’s available whether you itemize deductions or take the standard deduction.

Here are some qualifying self-employed workers who can claim the QBI deduction:

• Sole proprietors
• Partnerships
• S corporations
• LLCs

The QBI tax deduction is subject to income thresholds and other limitations. To qualify for the full deduction, your total taxable income must be $191,950 or less for single filers or $383,900 or less for joint filers.

To deduct QBI from your tax bill, you must complete and submit Form 8995 or Form 8995-A with your income tax return.

It’s worth noting that the QBI tax deduction is set to expire Dec. 31, 2025. Tax year 2025 will be the final year to claim the QBI deduction unless Congress chooses to extend it.

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