Tax Day Countdown: What Are the Most Generous Tax Deductions for the Self-Employed?
Written by
John Csiszar
Edited by
Ashleigh Ray
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One of the best things about being self-employed is that you are entitled to a whole host of boss-less independence, flexible scheduling and most importantly, tax deductions. While some overlap with those available to regular workers, self-employed individuals also have their own unique deductions.
It’s important to note that the IRS definition of “self-employment” is fairly broad so you may have to home in on which deductions you can claim for your specific financial situation. Even if you don’t feel like you run your own business, if you sell items online, pick up odd jobs or freelance, you’re likely entitled to some of the same type of business deductions as major corporations.
Here’s a look at some of the most generous tax deductions that are available to the self-employed.
Home Office Expenses
The home office deduction can be one of the most generous available to self-employed individuals. Essentially, if you dedicate a specific percentage of your home square footage to your “office space,” you can deduct the same percentage of a number of household expenses, from your mortgage interest and real estate taxes to your utilities, insurance, home repairs, water, sewage and so on.
Just be sure you meet the IRS requirements for a home office and keep accurate records to substantiate your deduction.
Health Insurance
If you work for yourself and are not covered by an employer health plan, you can deduct 100% of the health insurance premiums you pay for yourself, your spouse and your dependents. Long-term care insurance is also deductible, although there are limits based on your age.
Retirement Plan Contributions
Retirement plan contributions are generally deductible whether you’re a self-employed worker or not. But self-employed individuals have access to plans with higher contribution limits, making them potentially more valuable.
A solo 401(k) plan, for example, allows tax-deductible contributions of up to $70,000 in 2025, with higher amounts allowed if you’re over 50.
Qualified Business Income
As part of the Tax Cuts and Jobs Act of 2017, small businesses, including self-employed individuals, were allowed to write off 20% of their incomes. While this provision is currently slated to expire at the end of 2025, it may be extended by the incoming presidential administration.
Self-Employment Tax
One of the major downsides of working for yourself is that you’ll have to pay self-employment tax. If you work for a corporation, for example, you pay 7.65% of your income toward Social Security and Medicare taxes, up to an annual limit. Your employer is responsible for paying the other 7.65%.
However, if you work for yourself, you’ll have to pay both halves of that tax, as you are both employer and employee. That amounts to a whopping 15.3% of your income. Still, as a self-employed person, you do get to deduct the 7.65% employer portion of your self-employment taxes.
Business Travel and Meals
If you have to travel as an “ordinary and necessary” part of your business, you can deduct various expenses. Common qualifying expenses include, airfare, gasoline, bus or taxi fare, hotel or motel costs, and tips.
Meals can be deducted up to a 50% limit, although there are strict qualifying requirements. For example, you can’t deduct lavish or extravagant meals unless they are justified, and you must be actively conducting business. Personal travel or meal expenses are not deductible, nor are those for family traveling with you, unless they are employees.
Supplies
Just like in a corporate office, if you need to stock up on supplies for your self-run business, you can deduct those costs on your taxes. This includes everything from books, postage, pens and printers to professional instruments or equipment, as long as they are expected to be used up in a single year. Otherwise, you’ll have to deduct those costs over time via the depreciation deduction.
Depreciation
If you purchase assets that have an expected life longer than one year, like heavy machinery or a building, you can deduct those costs piece by piece over time. You may be able to deduct the entire cost of certain purchases under the Section 179 deduction, but you might want to consult a tax professional to determine the appropriate deduction you should use.
Business Insurance
You can deduct premium payments for almost any type of insurance that applies directly to your business. This includes everything from liability and workers’ compensation insurance to fire, theft, flood, malpractice, business interruption or overhead insurance. Auto insurance for vehicles used for business can also be deducted.
Business Interest
Businesses can deduct interest on loans they take out, and so can self-employed workers. These must be for business use and not personal use, however. But interest on SBA 7(a) loans does qualify.
Caitlyn Moorhead contributed to the reporting for this article.
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