15 Self-Employment Tax Deductions You Should Know

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If you have a side hustle — or are full-time in business for yourself — you might qualify for self-employment tax deductions.

These deductions can lower how much of your income is considered during tax season. If you can lower your taxable income, you can save a bundle in taxes for your business. Here’s how to find the top tax deductions when you’re self-employed.

Common Tax Deductions

Here are a few of the most common self-employment tax deductions:

1. Deductions for Being Self-Employed

If you’re self-employed, you will end up paying more Social Security and Medicare tax than an employee. This is because employers pay half the taxes for you — but self-employed individuals pay all of it.

Luckily, you can deduct half of self-employment taxes paid on your tax return.

2. Deductions for a Home Office

If you work from home and have a dedicated office space, you can deduct a portion of expenses like mortgage costs, property taxes, utilities and home repairs. You’ll need to calculate your office square footage and divide by your home total square footage to get the percentage of these expenses you can deduct.

For example; If you have a 100 sq. ft. office and 2,000 sq. f.t. home–you can deduct 5% of your qualified home expenses.

3. Deductions on Health Insurance Premiums

If you got a health insurance plan through the private marketplace or on your own (not through a job) — you may be able to deduct the premiums paid on your tax return. This is a direct adjustment to your income (not an itemized deduction), so you’ll save more in self-employment taxes.

But you’ll have to make sure you or your spouse don’t have access to an employer sponsored health plan (even if you don’t use it) — otherwise you don’t qualify for the deduction.

4. Deductions for Retirement Contributions

When you contribute to a pre-tax retirement plan (such as an IRA), you can deduct those contributions from your tax return. And if you’re self-employed, you can open a Solo 401(k) plan and deduct up to $69,000 in contributions (or $76,500 if age 50 or older).

This deduction includes up to $23,000 as an employee, and up to 25% of net earnings (up to $45,000) for a total of $69,000 in deductions. This can massively lower your tax burden and save thousands in taxes.

5. Deductions for Business Meals

If you take clients out for meals, you can deduct 50% of the total cost of the meal.

For example; if you have a prospective client meeting at a restaurant to discuss doing business together and spend $200 on food and drinks — you can deduct $100 of the cost on your business tax return.

6. Deductions for Vehicle Expenses

There are several ways to deduct vehicle expenses on your business tax return as a self-employed person. You can deduct the mileage used for meeting with clients or business travel at the current rate of 67 cents per mile (you must keep a mileage log).

Or you can use actual expenses paid for the year, including gas, oil, repairs, tires, insurance, registration fees, licenses and depreciation.

7. Deductions for Office Supplies

If you buy printer ink paper, pens and other daily use supplies for your office — you can deduct these expenses in full the year you make the purchase.

If you purchase larger items such as a computer, a new desk or office furniture — you may need to depreciate these items over time. 

8. Deductions for Internet and Phone Costs

If you use the internet or phone for your business — you can deduct these costs on your tax return. If you work from home, it’s important to note how much of your internet and cell phone usage is tied to your business.

You can only deduct the portion of the phone and internet expenses used for business — personal use does not count.

Industry-Specific Deductions

Different industries have different types of expenses. Here are a few examples of deductions for several types of industries:

9. Deductions for Equipment

If you operate a small business that uses heavy equipment — you may be able to deduct a portion or all of the purchase price of that equipment the year you buy it.

For example; If you buy a tractor for a farming business you’re running, you can deduct up to $1,220,000 in 2024, but it is reduced for equipment purchased for over $3,050,000 and placed in service in 2024. This deduction can have a massive impact on your small business taxes. 

10. Deductions for Marketing Expenses

If you spend any money to market your business, you can deduct these expenses on your tax return. This includes social media ads, billboards, signage and other marketing efforts.

Marketing may also include paying for radio or television ads — and other media advertising efforts.

11. Deductions for Travel Expenses

If you travel for your business (including conferences) — you can deduct 50% of meals costs plus 100% of the cost of flights, hotels and transportation. There are some limitations — meals must be business-related and not just with non-employee family members.

And meals can’t be “extravagant” or include an entertainment charge. You can also deduct daily meal allowances instead set forth by the General Service Administration.

Additional Tax-Saving Deductions

Here are a few lesser-known small business tax deductions that can help lower your self-employment taxes:

12. Qualified Business Income (QBI)

If you are self-employed or run a small business — you might be able to deduct a portion of your business income using the Qualified Business Income (QBI) deduction. This deduction allows you to deduct up to 20% of your business income derived from business activities.

13. Deductions for Education Expenses

If you’re self-employed, you can deduct expenses for qualified business education related to your work. But if this education expense qualifies for the American Opportunity Tax Credit or Lifetime Learning Credit — you can only choose one or the other, not both.

14. Deductions for Interest on Business Loans

If you have business loans that were used for only business purposes — you can deduct the interest you pay on them throughout the calendar year.

The amount of interest you deduct cannot exceed 30% of your adjusted taxable income (ATI) for the year.

15. Deductions for Software Fees

If you pay for software for your business — such as website services, tax preparation software, accounting software or other business-related software — you can deduct this from your business income.

Record-Keeping Tips

Running a small business can be challenging — and keeping records of your business expenses is one of the toughest parts about being a business owner. Here are a few tips to keep things organized so you can make sure to take advantage of all the deductions you’re eligible for:

Open a Business Bank Account

If you’re running a small business, you’ll want to have a completely separate business bank account. This keeps you from accidentally mixing both personal and business income and expenses–and keeps the IRS off your back.

Use Accounting Software

Account software (such as Quickbooks, Wave or Excel) makes tracking and organizing your business income and expenses easy. You can record business income and review quarterly statements. And you can review business expenses to keep track of what’s deductible.

And most accounting software can integrate with popular tax software — making it easier to file your taxes accurately.

Label Business Accurately

As your transactions populate in your accounting software — make sure to label the expense category accurately. Different types of expenses are deducted differently on your tax return — so make sure to keep up on your accounting labels so tax time isn’t a nightmare.

Keep Personal Expenses Separate

Don’t make personal purchases with your business credit card or bank account — and vice versa. It becomes a mess to your accountant — and you might miss business deductions if you’re not careful.

Filing Your Deductions

It’s a good idea to be thorough with your business deductions — remember, you’re paying a higher tax rate on self-employment income due to the self-employment tax.

If you’re not comfortable filing your tax return and claiming business deductions — it may be a good idea to consult a tax pro. Working with a licensed tax professional such as an Enrolled Agent or CPA can help you take advantage of every deduction you qualify for without getting heat from the IRS.

The Bottom Line

Being self-employed is a lot of work — but there are plenty of deductions to help offset the higher tax rate. Most tax software these days will walk you through deductions that you might qualify for — but it’s a good idea to keep track of your business expenses to take advantage of as many deductions as you can.

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