Every deduction lowers your taxable income, and for self-employed people many of them also lower self-employment tax. These are the ones we see missed most often. Remember the basic rule: the expense must be ordinary and necessary for your business, and you need records.
Home office
If you use part of your home regularly and only for business, you may deduct a share of rent or mortgage interest, utilities and insurance. The simplified method allows $5 per square foot, up to 300 square feet.
Vehicle
Business miles (not your commute to a regular workplace) can be deducted with the IRS standard mileage rate or actual expenses. A mileage log is essential.
Phone and internet
Deduct the business-use percentage of your cell phone and internet.
Self-employed health insurance
If you pay for your own health insurance and are not eligible for an employer plan, you can often deduct the premiums for you and your family.
Retirement contributions
A SEP-IRA or Solo 401(k) can let you save for retirement and reduce your taxes at the same time, sometimes even after the year ends.
Half of self-employment tax
You can deduct half of your self-employment tax when calculating your income tax. Good software does it automatically, but it is worth checking.
Startup costs
Costs to get your business started can often be deducted up to $5,000 in the first year, with the rest spread over time.
The small stuff that adds up
- Software and subscriptions (QuickBooks, Canva, scheduling apps)
- Bank fees and payment processing fees
- Business education and licenses
- Advertising, website and business cards
- Tools and equipment, which may be deductible in full the year you buy them
The Qualified Business Income deduction
Many owners of pass-through businesses can deduct up to 20% of their qualified business income. There are limits at higher incomes and for some professions.