Top 21 tax deductions for self-employed individuals
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If you’re self-employed, you probably know that taxes can be a complicated nut to crack. Not having taxes withheld from your earnings like a W-2 employee means you probably make estimated tax payments every quarter and might have a larger tax bill at the end of the year.
Fortunately, tax deductions can lower your taxable self-employment income, letting you keep more of what you earn in your bank account. These tax breaks are available to certain workers, including:
- Independent contractors (1099 workers)
- Freelancers
- Sole proprietors
- Single-member limited liability companies (LLCs)
- Partnership members
- S corporations
- Gig workers, such as rideshare drivers and seasonal wedding photographers
In this tax guide, we’ll walk through some of the most common tax deductions for self-employed workers, so you can save money and stay compliant during tax season.
- 1. Home Office Deduction
- 2. Self-Employment Tax Deduction
- 3. Health Insurance Deduction
- 4. Business insurance premiums deduction
- 5. Business expenses (ordinary and necessary costs)
- 6. Vehicle and mileage deduction
- 7. Travel and meals
- 8. Retirement contributions
- 9. Education and professional development
- 10. Marketing and advertising
- 11. Legal and professional services
- 12. Depreciation of business assets
- 13. Qualified Business Income (QBI) deduction
- 14. Phone and internet expenses
- 15. Software and technology tools
- 16. Bank fees and payment processing fees
- 17. Rent and utilities for business space
- 18. Startup and organizational costs
- 19. Business-related interest
- 20. Bad debts (for accrual-basis filers)
- 21. Casualty and theft losses
- Get the right business insurance to protect your livelihood
1. Home Office Deduction
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 regularly.
You can calculate your home office tax deduction in one of two ways:
Simplified method: Based on the square footage of your home office, you can deduct $5 per square foot, up to 300 square feet, or $1,500.
Regular method: You can deduct the actual expenses based on the percentage of your home used for business.
Actual expenses can include:
- Mortgage interest and property taxes
- Rent
- Utilities, such as electricity, water, and heat
- Homeowner’s insurance
- Security systems
- HOA dues and cleaning services
- Depreciation of the home office area
You can report your home office deduction on Schedule C (Form 1040).
2. Self-Employment Tax Deduction
If you’re self-employed, you must pay the self-employment tax. Currently, the self-employment tax rate is 15.3%, which includes both the employer’s and employee’s portions of Social Security tax and Medicare tax.
The IRS allows self-employed people to deduct 50% of this federal tax, AKA the employer’s share, from their adjusted gross income (AGI).
Use Schedule SE to calculate the 15.3% on your net earnings and report the deduction on Schedule 1 (Form 1040).
3. Health Insurance Deduction
Self-employed taxpayers can deduct their health insurance, dental insurance, and long-term care insurance premiums from their taxable income. This includes premiums for yourself, your spouse, and your dependents.
To be eligible for the health insurance premium tax deduction, you must meet two important requirements:
- Ineligible for employer-sponsored plan: If you’re eligible for an employer health plan, such as a spouse’s plan, you can’t take this deduction.
- Net profit requirement: If your business earns more than your total premiums, you can deduct 100% of those premiums. If not, you can only deduct up to the amount of your net profit.
To claim this deduction, use IRS Form 7206 to calculate the amount of premiums you can write off and record your deduction on Schedule 1 (Form 1040).
Self-employed individuals can write off business insurance premiums for policies that are necessary for the type of work you do.
These business insurance policies are typically deductible:
- General liability insurance
- Professional liability insurance, also known as errors and omissions insurance
- Workers’ compensation insurance
- Cyber insurance
- Commercial property insurance
Report business insurance premiums deductions on Schedule C (Form 1040).
5. Business expenses (ordinary and necessary costs)
Many business expenses can be deducted from your self-employed income taxes if they’re ordinary and necessary to operate your business. Common deductible business expenses include:
- Office supplies, such as printer paper and pens
- Equipment purchases, like computers and cellphones
- Desks, chairs, and related office expenses
Although you can claim this deduction without tracking your purchases, it’s highly recommended that you keep receipts and detailed records of all expenses in case the IRS conducts an audit.
You can claim this deduction on Schedule C (Form 1040).
6. Vehicle and mileage deduction
Self-employed small business owners can deduct vehicle expenses and mileage. However, the amount you can write off depends on how the vehicle is used.
If the vehicle is only used for business purposes, 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 both personal and business purposes, you can only deduct the portion used for business. 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 flat rate for every work-related mile you drive, plus parking fees and tolls. For the 2026 tax year, the standard mileage rate for business is 72.5 cents per mile.
- Actual expenses: Deduct the actual costs to operate your vehicle for work, including gas, maintenance, repairs, tires, depreciation, registration fees and licenses, parking fees and tolls, and insurance.
Mileage and car expenses can be reported on Schedule C (Form 1040).
7. Travel and meals
As a self-employed individual, you’re allowed to deduct the cost of business travel for yourself and employees.
Qualifying travel costs include:
- Transportation, including airfare, train tickets, car rentals, taxi or rideshare services
- Personal vehicle expenses, such as mileage, gas, parking fees, and tolls
- Lodging, including hotels, motels, and Airbnbs
- Baggage fees, internet access, tips for hotel staff, and other incidental costs
You can also deduct business-related meals. Typically, you can write off 50% of the cost of all meals during business trips. Make sure to document all meal receipts to make calculating this deduction easier at the end of the year.
Travel and meals deductions can be claimed on Schedule C (Form 1040).
8. Retirement contributions
Retirement plan contributions can be deducted from your taxable income if you contribute to a self-employed retirement plan, such as:
- SEP IRA: A Simplified Employee Pension (SEP) IRA has higher contribution limits than traditional IRAs or Roth IRAs.
- Solo 401(k): A Solo 401(k) plan is a pre-tax retirement plan designed for self-employed individuals.
- SIMPLE IRA: A Savings Incentive Match Plan for Employees (SIMPLE) IRA allows you to contribute to your retirement plan and employees’ retirement plans.
To deduct retirement contributions on your self-employed income tax return, use Schedule 1 (Form 1040).
9. Education and professional development
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
- Books, supplies, and industry-related materials
- Transportation and travel expenses to conferences
Not all professional development expenses qualify for the tax deduction. In general, the education courses must meet two criteria:
- They’re necessary to keep your current job or salary
- They help maintain or improve skills needed in your present work
The education and professional development deduction is reported on Schedule C (Form 1040).
10. Marketing and advertising
Marketing and advertising can be a good investment for your business. You can deduct these expenses from your taxes, including:
- 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 deduction, report your expenses on Schedule C (Form 1040).
11. Legal and professional services
If your business uses professional services during the taxable year, these expenses may qualify as a tax deduction. You can typically deduct fees paid to:
- Lawyers
- Accountants, CPAs, and other tax professionals
- Bookkeepers
- IT consultants
- Public relations agencies
When filling out your tax return, report these costs on Schedule C (Form 1040).
12. Depreciation of business assets
If you own assets that are essential to your business operation, you might be able to write off the depreciation from your income taxes. Examples of depreciating business assets include:
- Real estate, such as a storefront or commercial building
- Computers and electronic equipment
- Machinery
- Business use vehicles
- Office furniture, appliances, and related expenses
Expensive, longer-lasting equipment, such as computers, machinery, and office furniture, is typically considered a capital asset, and the value must be depreciated during an item’s useful life. But there are special rules that allow immediate expensing:
- Section 179 deduction: This allows businesses to deduct the full purchase price of eligible equipment in the year it’s installed, instead of depreciating it over time. In 2026, the maximum deduction is about $2.56 million with a phase-out starting around $4.09 million in total equipment purchases, although these numbers are adjusted annually for inflation.
- Bonus depreciation: For the 2026 tax year, businesses can get a 100% bonus depreciation for eligible property acquired after January 19, 2025.
You can claim depreciation on business assets by filing IRS Form 4562 with your other tax forms.
The qualified business income deduction, also known as the Section 199A deduction, allows self-employed taxpayers to deduct up to 20% of their qualified business income on their personal tax returns.
13. Qualified Business Income (QBI) deduction
The qualified business income deduction, also known as the Section 199A deduction, allows self-employed taxpayers to deduct up to 20% of their qualified business income on their personal tax returns. Certain types of income are excluded from QBI, including:
- W-2 wages received as an employee
- Guaranteed payments to partners
- Capital gains and losses
- Specific dividends, interest income, and investment income
- Income earned outside of the U.S.
In 2026, you generally qualify for the full deduction if your income as a single filer is below $203,000 or $406,000 if married filing jointly. If your taxable income exceeds these thresholds, additional limitations may apply.
Use IRS Form 8995 to calculate the QBI deduction and report it on Form 1040.
14. Phone and internet expenses
If you’re self-employed, you can usually write off internet and cellphone expenses from your 2026 federal income taxes, if these services are a business essential. This includes Wi-Fi costs if you’re traveling or working from a hotel.
However, if you also use your cellphone and internet services for personal tasks, you can only deduct the percentage of the cost that’s used for business.
You can deduct these expenses on Schedule C (Form 1040).
15. Software and technology tools
Should your business need software to maintain or improve operations, you can deduct the associated costs, typically for:
- SaaS and subscriptions
- Computer software suites
- Project management tools
- Tax preparation software and digital tax filing services
The type of product purchased determines how you can deduct the cost. For example, the total cost you paid in the year for a service or subscription can be written off. But, software that has a useful life of more than one year likely needs to be depreciated over many years.
Software deductions can be claimed on Schedule C (Form 1040).
16. Bank fees and payment processing fees
Having a bank account for your business is a smart move—and you can deduct any associated fees, such as:
- Monthly service fees
- Overdraft fees
- Wire transfer fees
If your business sells products using a third-party payment vendor, like PayPal or Square, you can also write off those fees.
Keep in mind, this small business tax deduction only applies to business needs, not your personal bank account. So, if your business profits get deposited into your personal checking account, you aren’t eligible for the deduction.
Make sure to maintain detailed records, including 1099-K forms and bank statements, to document these expenses. You can claim these deductions on Schedule C (Form 1040).
17. Rent and utilities for business space
When self-employed individuals rent office space, coworking space, a studio, or a workshop, they can deduct the monthly rent payment and utility bills from their taxable income. They can also deduct rent for a business parking spot.
Unlike the home office deduction, the rent deduction only applies to business owners who pay rent on business property outside of their home. If you pay rent on your home or apartment, and you work from home full-time, you should claim the home office deduction instead.
You can report rent and utility expenses on Schedule C (Form 1040).
18. Startup and organizational costs
Did you launch a business in 2026? If so, the IRS allows you to deduct 100% of your startup costs, up to $5,000. These costs must be normal deductions for established businesses but are incurred before your business officially opens.
These expenses may include:
- Working with a business consultant
- Getting legal guidance
- Traveling to conferences
- Attending training events in the industry
- Launching a marketing campaign
- Building a website
You can report these deductions on Schedule C (Form 1040).
Typically, you can deduct the interest you pay on business credit cards and business loans if:
- You’re legally liable for the debt
- You and your lender expect the debt to be repaid
- You and the lender have a true debtor/creditor relationship
Claim these deductions with Schedule C (Form 1040).
20. Bad debts (for accrual-basis filers)
Should a customer, supplier, employee, or other third party fail to pay an invoice, you can usually write off the bad debt. To claim this deduction, you must:
- Use the accrual method to deduct unpaid invoices, since you must have included the income in your books previously
- Prove the debt is completely worthless and uncollectible, such as bankruptcy or death
- Keep detailed records of any collection efforts
- Report the loss in the year it becomes uncollectible
All bad debt deductions can be reported on Schedule C (Form 1040).
21. Casualty and theft losses
If your business property is stolen or gets destroyed by a fire, storm, or vandalism, you can write off the loss. To determine the loss value, follow these steps:
- Find the adjusted basis of the property, which is usually the original cost minus depreciation already taken.
- Determine the drop in fair market value (FMV), by subtracting the FMV after the event from the FMV before the event.
- Compare adjusted basis and FMV and use the smaller number as the loss value.
- Subtract any insurance or reimbursements.
- The remaining amount is your deductible loss.
Before writing off casualty or theft loss, here are some important considerations:
- Unreimbursed amounts only: You can’t deduct losses covered by insurance.
- No personal limits: Unlike personal losses, business casualty losses are not subject to the $100-per-event limit or the 10% of adjusted gross income (AGI) floor.
- Sudden event requirement: The loss must be due to a sudden or unexpected incident, such as a fire, flood, or car accident.
You can claim these losses with Form 4684 Section B and report net losses on Schedule C.
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