As a self-employed individual, taking advantage of tax deductions and write-offs is necessary to save more of your hard-earned money during tax season.
Tax deductions are basically expenses you can subtract from your total income before taxes. And less income means less taxes.
It’s like telling the tax office, “Hey, I spent this much on my work, so I shouldn’t be taxed on it.”
If you’re self-employed, whether as a freelancer, contractor, or running your own business, there’s a variety of these deductions you can use to lower your tax bill.
Basically, it’s the government thanking you for doing business with them.
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The IRS provides specific guidelines and provisions for these self-employed tax deductions. But the question is: Are you making the most of these opportunities?
90% of self-employed individuals are not.
So, let’s walk you through the top 24 self-employed tax deductions that you should definitely not overlook.
Table of Contents
#1. Home Office Deduction
If you work from home, you can save money on taxes by taking advantage of the home office deduction.
This works whether you own a place or rent one.
In order to qualify, you must use a portion of your home exclusively and regularly for business.
If so, you may be able to write-off both, direct and indirect home expenses under your business.
Direct expenses are 100% deductible as a business expense. It reflects expenses that are directly related to the business area in your home.
For instance, if you paint your home office or buy supplies for it, this is a direct expense. This is fully deductible.
Indirect expenses are what pay to keep your entire home up and running. Examples include general repairs, utilities for your home, and homeowner’s or renter’s insurance.
Indirect expenses are deductible based on the business use % of your home.
To figure out how much money you can save on taxes for using this space, you need to determine the proportion of the office space compared to to your entire house.
Here’s how to do it: First, measure the area of your office space. Then, divide it by the total area of your home.
If your office space takes up 10% of your home, then 10% of all of your indirect home expenses can be deducted.
Indirect expenses include:
- Mortgage interest
- Real estate taxes
- Utilities
- Insurance
- Repairs and maintenance
- Depreciation
- Rent
Simply tally these expenses up and aim to deduct a portion of it under the home-office deduction.
#2. Phone Services
If you use your phone to conduct business, you can write-off a portion of it as a self-employed tax deduction.
This includes the phone service, storage, and additional apps or tools that are required to use it for your business.
The portion you can write-off depends on how much the phone is used for your business versus your personal activities.
For example, if your cell phone is used 100% of the time for business, then you may write-off 100% of the cost as a self-employed individual.
#3. Travel Deductions
Travel expenses for business like flying out for conferences, client meetings, and even overnight stays—are deductible.
For instance, if your business trip includes airfare, car hire, and a hotel stay, those can be deducted.
However, in order to deduct these expenses, there must be a business purpose for the travel expense.
To write-off airfare, there must be a business reason for the travel. Whether it is to attend a board meeting, seminar, conference, or meet with a prospect, there must be a business purpose.
To write-off lodging, there must be business conducted for each day of lodging expenses you wish to deduct. Lodging expenses are not deductible for personal days during your travel.
In general, you should work at least 4 hours per business day in order for the incurred expenses to be tax deductible.
The same applies to transportation. Transportation costs incurred to travel to and from necessary locations are deductible, as long as it is necessary for the business purpose of the trip.
However, transportation costs to enjoy a theme park or excursion with family is not deductible.
You can use this guideline to determine which travel expenses can be deducted from your tax bill.
#4. Internet Bills Deduction
For anyone self-employed, reliable internet services are essential to ensure your business runs smoothly.
Whether you’re dealing with clients, running online workshops, or just sending out a bunch of emails, you can actually deduct most of what you spend on these services from your taxable income.
It’s one of those benefits the tax system offers because it recognizes just how necessary it is to stay connected for your business operations.
How it works – Estimate the portion of these services that you use for business and deduct that percentage of the costs.
Keeping detailed records will support your claim.
#5. Health Insurance Premiums Deduction
Premiums for health, dental, and qualified long-term care (LTC) insurance for yourself, are all deductible.
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The best part about this deduction is, it doesn’t just stop with you — it also extends to premiums paid for your spouse, dependents, and any of your children under 27 years old at the end of the year, regardless of their dependent status on your taxes.
In order for you to find out exactly how much you can deduct, use the Self-Employed Health Insurance Deduction Worksheet found in IRS Publication 535.
With this worksheet, you can calculate the deduction correctly while staying in line with IRS guidelines, so that you get the maximum benefit.
Or even better, you can get a licensed CPA involved to help you do this correctly.
#6. Supplies and Equipment Deduction
We all know that pouring money into a business often involves buying all sorts of supplies and tools.
What’s great is that these expenses aren’t just costs; they can also help reduce your tax bill.
Whether it’s for big-ticket items like computers, and software or everyday needs like paper and ink, the money you spend to keep your business up and running can be deducted.
Through self-employed tax deductions, you can reduce taxes on necessary business items, increasing your savings.
#7. Self-Employment Tax Deduction
If you run your own business, like a sole proprietorship, partnership, or LLC, you pay a tax called the self-employment tax, which is 15.3%. This tax goes towards Social Security(12.4%) and Medicare(2.9%), two important programs as you grow older or need medical care.
It’s higher than what employees face because you’re covering both the worker’s and the employer’s contributions to Social Security and Medicare.
In a traditional employee-employer setup, an employee pays 7.65% and their employer pays the same amount.
This can make the self-employment tax feel like a big weight. But, there are a couple of ways to lighten the load:
- Choose a business structure that is free of self-employment taxes. C-Corps and S-Corps don’t pay self-employment tax, but they do follow different tax rules.
- What you pay for self-employment tax is deductible when you file your taxes. If you pay this tax, you would do yourself a disservice to not deduct it.
Changing your business structure will come with more requirements, like payroll and separate tax forms. Before making any change, you should weigh the pros (tax savings) against the cons (costs, time, etc.).
#8. Vehicle Use Deduction
When you drive your car for your own business, you can deduct a portion of your vehicle costs under your business.
Just remember, you need to keep a good record of every drive for work. Take note of the date, distance, destination, and business purpose associated with the trip.
The IRS gives you two options to claim vehicle deductions:
Standard Mileage Rate: For 2024, it’s 67 cents for every mile you drive for work. Track your work miles and the dates you drove them, then multiply your total work miles by 67 cents to find out how much you can deduct.
Actual Expenses: This applies to a percentage of specific costs to run your car for the year – things like gas, oil changes, maintenance, and insurance.
Other car expenses for parking fees and tolls related to business use are separately deductible, regardless of whether you use the standard mileage rate or your actual expenses.
#9. Business Meals Deduction
When you’re self-employed and meet someone over a meal to discuss business, you’re in a position to deduct a portion of these meal costs from your income.
The key is ensuring the meals involve:
- At least one business contact: such as a business partner, client, vendor, or prospect.
- Business discussions and topics: the topic and conversions should be conducted in the pursuit of business income.
Upon meeting this criteria, you may use the business meals deduction.
You’re typically allowed to deduct 50% of these meal expenses or 50% of the standard meal allowance. However, meals during business travel are usually 100% deductible.
Keep your receipts if possible. If you don’t have them, you can document the time, date, place, business contacts, and business purpose of the meal instead.
#10. Hiring Your Children
Bringing your children into your business can be an effective strategy to reduce taxes for self-employed parents.
The wages you pay them are tax deductible.
Plus, the income can be tax-free to them if you pay them less than the standard deduction.
In 2024, the standard deduction is approximately $14,600 in 2024. This means they will not owe any income tax on income below this amount.
This effectively allows you to transfer income from your [likely higher tax bracket] to their lower one.
Furthermore, you might find it advantageous to pay your children more than the standard deduction to further redistribute your income to their lower tax bracket.
However, the work they do for your business must be legitimate to justify their pay.
#11. Health Savings Account
A health savings account is like a piggy bank for your health, but better.
Yes, it allows you to save money to use for qualified health expenses, but it also a great vehicle to build tax-free wealth.
First-off, the money you contribute to your HSA is tax deductible.
So you do not pay tax on income you put into this account.
Secondly, you pay no tax when you take money out of your HSA, as long as it is used for qualified health expenses.
The IRS provides a laundry list of the various types of qualified health expenses here. But generally speaking, most health expenses qualify if there is a medical necessity for the expense.
For instances, if your doctor prescribes exercise to treat obesity, you may be able to write-off things like your gym membership.
Ultimately, when you use your HSA for qualified expenses, you will not pay tax on it.
Therefore, you will effectively never pay tax on funds contributed to your HSA as long as you use it correctly.
And finally, once you put funds into your HSA, you can invest it into various assets like index funds, stocks, or bonds.
And when those investments grow in value, you also pay no tax on the gains inside the account.
In order to be eligible for an HSA, you must be:
- Covered under an HDHP (high deductible health plan)
- Have no other health coverage except what is permitted under “Other health coverage” on the IRS website
- Not enrolled in Medicare
#12. Education Deduction
As a self-employed individual, you can reduce your taxable income by deducting the cost of educational costs that enhance skills relevant to your business.
This may include expenses related to obtaining certifications, diplomas, degrees, licenses, or any other professional qualifications required to run your trade or business.
But if it’s for something unrelated to your business, like a yoga class, you can’t use it to lower your taxes.
#13. Business Insurance Deduction
There are multiple types of business insurance that are tax-deductible, provided they are required in order to operate your business.
This may include the money you spend on insurance for your business such as:
- Business liability insurance
- Car insurance for a company vehicle
- Errors and omissions insurance
- Credit insurance
It makes paying those premiums feel a bit easier, knowing they can help lower your tax bill.
#14. Startup Costs Deduction
Starting your own business as a self-employed comes with its fair share of expenses, but some of these costs can actually help slash your tax bill.
You can deduct:
- Advertising for your grand opening
- Trips to find suppliers or customers
- Paying for professional advice
- Training staff before your business officially opens
The IRS allows you to deduct up to $5,000 in start-up costs for the first year. Additionally, up to another $5,000 in organizational expenses, like state filing fees and legal fees, can be deducted.
#15. Advertising Deduction
Having the option to deduct advertising costs is a huge win for self-employed individuals.
All the money you spend spreading the word about your business is 100% tax deductible.
Whether you’re paying for ads online (like on Facebook or Google) or going old school with newspaper ads, billboards, or even business cards, these costs can help reduce your tax bill as long as they’re for promoting your business.
Pretty much any money you spend on getting your business noticed can be deducted as an advertising expense.
#16. Rent Deduction
If you’re renting a place for your business like an office, a storage area, or even a small spot in someone’s backyard— the rent you pay is tax deductible.
Whether it’s a big commercial space or a simple shed; if it’s necessary for your business, it counts.
Also, renting equipment and paying fees to cancel a business lease are both deductible expenses.
#17. Utilities Deduction
Just like rent, the bills you pay for keeping the lights on, the internet running, and the water flowing at your business place are also tax deductible.
Make sure to pay these bills from your business account and keep those receipts safe, so you don’t miss out on claiming these deductions.
By doing so, you can maximize your self-employed tax deductions, resulting in bigger savings.
#18. Repairs and Maintenance Deduction
For self-employed individuals, the money you put into repairs or maintenance for your business property can also be written off.
Here’s the catch: if it’s considered a repair, you can deduct the whole cost.
If it is considered a renovation, their costs are only partially deductible and must be depreciated over time.
Repair expenses must be incurred to keep your property running in normal operating condition.
Renovations refer to changes that increase the value of your property.
#19. Retirement Plan Contributions Deduction
Putting money into a retirement plan like a SEP-IRA or Solo 401(k) is a wise choice for the self-employed individuals.
You can much more money into these plans than you can with a standard IRA.
Plus, the contributions you put on your plans are tax deductible if made to a Traditional account.
This enables you to lower your current tax liability and build up investment gains that are deferred for tax purposes for the future.
The amount you can put into your retirement plan changes every year and depends on the type of plan.
For 2024, the annual contribution limits for a SEP-IRA and solo 401(k) are set at $69,000. While the limit for a SIMPLE IRA is set at $16,000.
The IRS updates these limits every year, making it easier for you to plan your self-employed tax deductions and savings strategies.
#20. Legal and Professional Service Fees
When you’re self-employed, any money you spend on services like lawyers, accountants, or bookkeepers can be deducted from your taxes.
You might also be spending on other experts such as ad agencies, insurance agents, or even call centers depending on what your business needs. These costs are also tax deductible.
To make sure you can deduct these expenses, you’ll need to let the IRS know about any payments over $600 by filling out a 1099 form for each service provider.
You can also use a program like QuickBooks to keep track of these payments and handle the 1099 forms, so you don’t miss out on these deductions.
#21. Business Loan Interest Deduction
If you’re self-employed and have taken out a loan for your business, the interest you pay on that loan can be considered deductible expenses.
These include interest from:
- Mortgage interest on commercial property
- Business loan interest
- Business credit card interest
The principal isn’t deductible, only the interest portion is considered a deductible expense.
#22. Tax Preparation Deduction
If you’re paying for a tax expert like a CPA to do your taxes, that cost is a business expense you can deduct.
Most self-employed are looking to pay as little in taxes as legally possible and this actually helps in two big ways:
- You get a tax deduction for hiring a tax professional.
- A good tax professional can help you find even more ways to lower your taxes.
#23. Office and Technology Expenses
As a business, you can deduct 100% of direct office, administrative, and technology expenses required to operate. This includes:
- Computers and accessories
- Printers, paper, pens, notebooks
- Accounting software
- Payment processing services
- Business apps and tools
- Websites and hosting
- Office furniture
- Administrative supplies
Basically, if you need it to administer and run your company day-to-day, it’s deductible.
These expenses can add up to substantial tax write-offs to reduce your taxes.
In order to maximize your tax savings, be meticulous about tracking expenses in these categories. A single missed expense can result in you paying more taxes.
#24. The Qualified Business Income Deduction
For self-employed people, you can now benefit from a tax deduction called the qualified business income deduction (QBI).
Basically, it’s a tax break that lets you deduct up to 20% of your net business income
Let’s say your business makes $100,000. With the 20% QBI deduction, your taxable income drops to $80,000.
If your tax rate is 25%, you’ve just pocketed an extra $5,000 thanks to this deduction!
Now, to qualify for this deduction, your business needs to be a “qualified” trade or business.
Unfortunately, certain “specified services” don’t usually get this deduction.
We’re talking about businesses where the owner’s personal reputation or skill is a big deal—like in the health, finance, law, and accounting sectors.
There are, however, some exceptions to the rule that allow many service businesses to still claim the deduction.
For instance, if your earnings fall under certain limits, you might still qualify for the deduction, even if you’re in one of those “specified service” fields.
It’s a little secret that not even all CPAs know about, but it’s right there in the QBI guidelines. The trick is making sure your business setup and how you make money align with the QBI rules.
And if you’re in a special service category, knowing how to work those exceptions is key.
Bottom Line
The tips we’ve shared here, focusing on self-employed tax deductions, are exactly what you need. These are a great starting point for anyone who wants to increase their savings by paying less taxes.
My advice? Don’t stop here.
Look deeper, keep learning, and always look for ways to make your money work smarter for you.
Keep in mind that effective planning involves taking advantage of all the self-employed tax deductions you’re entitled to.
We all want to minimize our taxes, and with a little research and planning, it can be done.
And, because the tax world can be a bit of a puzzle, consulting with a tax professional could be your smartest move.
They’re the experts who can help you make sure you’re squeezing every last benefit from your deductions while keeping everything above board with the IRS.
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