Solo Tax Optimizer

Tax deductions for self-employed people: a practical checklist

Updated October 22, 2026 · By the Solo Tax Optimizer team · Not tax advice

Deductions are the main way self-employed people control their tax bill. Business expenses reduce your net profit, which lowers both income tax and self-employment tax. To be deductible, an expense must be ordinary and necessary for your business: common in your field and helpful for earning income.

Here are the deductions most freelancers and sole proprietors should check.

Deductions that reduce net profit (Schedule C)

Home office

If you use part of your home regularly and exclusively for business, and it is your principal place of business, you can deduct it. There are two methods:

  • Simplified: $5 per square foot, up to 300 square feet, for a maximum of $1,500.
  • Regular: the business percentage of your actual home costs, such as rent or mortgage interest, utilities, insurance, repairs and depreciation. This takes more record keeping and is calculated on Form 8829.

A spare-room office qualifies. A kitchen table you also eat at generally does not.

Vehicle

You can deduct business driving using either the IRS standard mileage rate for the year or your actual costs (fuel, insurance, repairs, depreciation) times your business-use percentage. Either way, keep a mileage log. Commuting from home to a regular workplace is not deductible.

Equipment and software

Computers, cameras, tools, furniture and software used for business are deductible. Instead of spreading the cost over several years, you can often deduct the full cost in the year you buy it through the de minimis safe harbor, Section 179 or bonus depreciation. If you also use an item personally, deduct only the business share.

Phone and internet

Deduct the business-use percentage of your phone and internet bills. A separate business line is easiest to justify.

Professional services and fees

  • Accounting, bookkeeping and tax preparation for the business
  • Legal fees
  • Payment processing, platform and bank fees
  • Business licenses and professional memberships

Marketing

Website hosting, domain names, advertising, business cards and portfolio costs.

Travel

When you travel away from home overnight mainly for business, you can deduct transportation, lodging and 50% of meals. Personal days and costs for family members traveling with you are not deductible.

Business meals

Meals with clients or prospects to discuss business are generally 50% deductible. Record who attended and what was discussed.

Education

Courses, books and conferences that maintain or improve skills in your current business are deductible. Training for a new career is not.

Insurance

Professional liability, business property and cyber insurance premiums are business expenses.

Deductions on your Form 1040 (not Schedule C)

These reduce income tax but not self-employment tax:

  • Half of self-employment tax, which is automatic when you file Schedule SE.
  • Self-employed health insurance: premiums for medical, dental and qualifying long-term care insurance for you, your spouse and dependents, if you weren't eligible for an employer-subsidized plan through your own or your spouse's job that month.
  • Retirement contributions to a SEP IRA or Solo 401(k). See Solo 401(k) vs SEP IRA.
  • Health savings account (HSA) contributions, if you have a qualifying high-deductible health plan.
  • The QBI deduction of up to 20% of qualified business income, taken after adjusted gross income.

What you cannot deduct

  • Commuting between home and a regular work location
  • Entertainment, such as concert or sports tickets, even with clients
  • Everyday clothing, even if you only wear it to work
  • Personal expenses run through the business account
  • Fines and penalties, including IRS penalties
  • Political contributions

Record keeping that holds up

  • Use a separate bank account and card for the business.
  • Save receipts digitally, with a note of the business purpose.
  • Keep a contemporaneous mileage log, either an app or a notebook.
  • Reconcile your books monthly rather than once a year.

Once your profit is consistently high, deductions are only part of the story. An S-Corp election may save more. See when to elect S-Corp status.

Frequently asked questions

How much does a business deduction actually save?

A business expense deducted on Schedule C reduces both self-employment tax (by about 14 cents per dollar) and income tax at your marginal rate. In the 22% bracket, a $1,000 expense saves roughly $300 in federal tax. It still costs you $1,000, so only spend money the business needs.

Do I need receipts for every expense?

You need records that prove the amount, date, place and business purpose of an expense. Receipts, invoices, bank and card statements and a mileage log all count. Keep records for at least three years after you file, and longer in some situations.

This guide explains general federal tax rules for the 2026 tax year. It is not tax, legal or financial advice. Your situation may differ, so talk to a qualified tax professional before acting on it.

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