Self-Employed Deductions Guide

What a freelancer or sole proprietor can generally deduct, how each deduction actually lowers the bill, and what you need to prove it.

Last updated: October 12, 2026. The home office, vehicle, self-employment tax and QBI rules described here were checked against the IRS pages listed under Sources on that date. This guide describes rules in general terms and gives no dollar limits that were not on those pages.

How a deduction saves you money

A deduction does not cancel tax dollar for dollar. It reduces the income that is taxed, so the saving is the deduction multiplied by the rate that applies to your last dollars of income. For a self-employed person there are two taxes to think about. A business expense subtracted on Schedule C reduces net profit, and net profit is the base for both self-employment tax and income tax. Because self-employment tax is 15.3% of 92.35% of net profit (about 14.1%) and income tax adds 10% to 37% on top, a $1,000 business expense saves roughly $260 in the 12% bracket and $360 in the 22% bracket. The deductions that are taken later on the Form 1040, such as the standard deduction or the QBI deduction, reduce only the income tax and leave self-employment tax alone.

The rest of this guide separates the deductions into three groups: ordinary business expenses, special rules for home and vehicle use, and the deductions that come off your income after profit has been calculated.

Ordinary and necessary business expenses

The IRS describes net earnings from self-employment as gross business income minus the ordinary and necessary expenses of running the business. "Ordinary" means common in your line of work, and "necessary" means helpful and appropriate for the business. Typical categories include:

• Software and subscriptions used in the work, such as design tools, accounting software or a project manager.
• Equipment and supplies, from a laptop to printer paper. Larger purchases may need to be depreciated or may qualify for special first-year write-offs, so check the rules for assets that last more than a year.
• Professional services such as an accountant, a lawyer or a bookkeeper, when the service relates to the business.
• Marketing: a website, hosting, advertising, business cards.
• Insurance, licenses and fees that are required to operate.
• Phone and internet, but only the business-use share when the line is also personal.
• Education that maintains or improves skills you already use in the business, as opposed to training that qualifies you for a new trade.
• Platform and payment fees charged by marketplaces or card processors.

The test that sorts most gray areas is the business purpose. A mixed-use item is deductible only for its business share, and a purely personal item is not deductible even if you buy it from a business account.

The home office

If you work from home, part of your housing cost may be deductible, but the rules are strict. The IRS requires that you use part of your home regularly and exclusively for business, and that it is your principal place of business or a place where you meet clients or customers in the normal course of work. Space that is merely "appropriate and helpful" does not qualify, and neither does a desk in a bedroom that is also used for sleeping and guests. A separate structure such as a studio or garage can qualify too.

There are two ways to calculate the deduction. The regular method deducts the business share of actual expenses such as mortgage interest, insurance, utilities, repairs and depreciation, using the percentage of the home devoted to business, and self-employed filers report it on Form 8829. The simplified method, available since 2013, multiplies a prescribed rate by the square footage of the office, which reduces record-keeping. The simplified rate and caps are set by the IRS in Revenue Procedure 2013-13 and in Publication 587, so look them up there instead of relying on a number from a blog. The regular method can produce a larger deduction for people with expensive housing, while the simplified method is far easier to defend.

Vehicle use

Self-employed people can deduct the business use of a car. There are two methods. The standard mileage rate multiplies business miles by a rate that the IRS announces; for 2026 the IRS uses different rates for the first and second halves of the year, as described in IRS Announcement 2026-11. The actual expense method divides total costs (gas, oil, repairs, tires, insurance, registration, licenses and depreciation or lease payments) between business and personal use. Parking fees and tolls for business trips are deductible under either method.

Some points that trip people up: commuting between home and a regular workplace is not business mileage; if you choose the standard rate for an owned car you generally must do so in the first year the car is used in the business; and the law requires adequate records, which in practice means a mileage log with the date, destination, purpose and miles of each trip. Estimating at the end of the year is risky.

Deductions that come after profit

• Half of your self-employment tax. You deduct one half of the tax when computing adjusted gross income. Schedule SE calculates it and it carries to Schedule 1. The calculators on this site apply it automatically. See an example on the freelancer examples page.
• The standard deduction. For 2026 it is $16,100 for a single filer, and it applies whether or not you have business expenses.
• The qualified business income (QBI) deduction. Eligible owners of sole proprietorships, partnerships and S corporations can deduct up to 20% of qualified business income, whether or not they itemize. It is limited by taxable income, the type of business and, above certain levels, by W-2 wages and property. The IRS also describes changes for tax years after 2025, including a minimum deduction for active qualified business income that requires material participation. Wages you earn as an employee are not QBI.
• Other adjustments such as self-employed health insurance and contributions to a retirement plan for the self-employed are common for freelancers. Their limits depend on your profit and your plan, so read the IRS publications for them before relying on a number.

Records that protect a deduction

A deduction you cannot prove can be taken away. Keep a receipt or invoice, the date, the amount, who was paid and the business reason for every expense, and keep bank and card statements as a backup. Use a separate bank account and card for the business so personal spending does not blur the totals. Keep mileage logs for the year, a floor plan or measurement of any home office, and copies of the returns themselves. Cloud storage and a monthly reconciliation routine take about an hour and avoid a scramble later.

What you cannot deduct

• Personal expenses, even when paid from a business account.
• Commuting costs to a regular place of work.
• Estimated tax payments themselves. They are payments toward your tax, not an expense.
• Fines and penalties paid to a government for breaking the law.
• Anything you cannot connect to the business, for example the whole cost of a family phone plan.

Related: the common mistakes guide and the deadlines and penalties guide.