Freelancer Tax Deductions You Should Know

The golden rule: ordinary and necessary

The IRS allows you to deduct expenses that are ordinary (common in your line of work) and necessary (helpful and appropriate for your business). Most freelancers report these on Schedule C, the form where your business income and expenses net out to the profit that flows onto your 1040. Keep business and personal spending separate, and when an expense is mixed, deduct only the business-use portion.

The home office deduction

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

• Simplified method: $5 per square foot of office space, up to 300 square feet, for a maximum deduction of $1,500. Easy and low-documentation.
• Actual-expense method: calculate the percentage of your home used for business and deduct that share of rent or mortgage interest, utilities, insurance, and repairs. More work, but often a bigger deduction.

The "exclusive use" test matters: a desk in the corner of a room that doubles as a guest bedroom can be tricky to defend, so keep the space genuinely dedicated to work.

Business mileage and vehicle costs

Driving for business - to client meetings, the post office, or to buy supplies - is deductible. The simplest approach is the standard mileage rate, where you multiply your business miles by the IRS per-mile rate for the year. Alternatively, the actual-expense method deducts the business-use share of gas, maintenance, insurance, and depreciation. Either way, your commute to a regular workplace does not count, and you must keep a mileage log with dates, destinations, and purpose.

Software, subscriptions, and supplies

The tools of a modern freelance business are fully deductible: design and accounting software, cloud storage, your website and hosting, professional subscriptions, and the apps you use to run the business. Physical supplies, a business-use computer, a monitor, and other equipment qualify too. A reasonable business-use percentage of your phone and internet bills is also deductible.

Self-employed health insurance

One of the most valuable breaks for freelancers: if you are not eligible for a subsidized employer plan (including through a spouse), you can generally deduct 100% of your health insurance premiums for yourself, your spouse, and your dependents. This is taken as an adjustment to income on your Form 1040 rather than on Schedule C, so it lowers your income tax even though it does not reduce self-employment tax.

Retirement contributions

Saving for retirement and cutting your tax bill at the same time is one of the best moves a profitable freelancer can make. A SEP-IRA or Solo 401(k) lets you contribute far more than a standard IRA - a meaningful share of your net self-employment income - and those contributions reduce your taxable income. The Solo 401(k) in particular allows both an employee and an employer contribution, which can add up to a large deduction for higher earners.

The QBI deduction

The Qualified Business Income (QBI) deduction, from Section 199A, lets many self-employed people deduct up to 20% of their net business income before calculating income tax. It is not a business expense - you do not spend anything to get it - which makes it exceptional value. For 2025 it begins to phase out for "specified service" businesses such as consulting, design, law, health, and finance once taxable income exceeds $197,300 (single) or $394,600 (married filing jointly). Below those thresholds, most freelancers get the full 20%.

Other common deductions

• Advertising and marketing, including ads, a logo, and business cards.
• Professional services: fees you pay an accountant, bookkeeper, or attorney.
• Business insurance, such as professional liability coverage.
• Education that maintains or improves skills for your current business.
• Bank and payment-processing fees, including the cut PayPal or Stripe takes.
• Half of your self-employment tax, deducted automatically as an adjustment to income.

Recordkeeping that protects every deduction

A deduction is only as good as your ability to prove it. Build a few simple habits and you will never sweat an audit:

• Use a dedicated business bank account and card. This single step makes bookkeeping and tax prep dramatically easier.
• Save receipts and digital records. Photograph paper receipts and keep them in one place; the IRS generally expects you to retain records for at least three years.
• Log mileage as you go, not from memory at year-end.
• Track income and expenses monthly so nothing is lost and you always know your real net profit.

Once you know your deductible expenses, you can estimate your true tax bill on your net profit. Run the numbers through our 1099 tax calculator to see how much your deductions actually save you, and pair it with our set-aside guide to keep the right amount ready for the IRS.

This guide is educational and uses 2025 US federal figures. Tax situations vary, so confirm anything significant with a qualified tax professional.