Self-employed folks have expenses they incur yearly in order to do business, so it is important for them to review what can be deducted each year to make their business as profitable as possible. Expenses like a home office, car, health insurance, and even startup costs can get you a big tax break. Did you know that advertising, and retirement plan costs are also legitimate deductions? Here is a short list of expenses that are eligible for tax deductions which can minimize tax liability for self-employed individuals.
- Retirement Plan Contributions
You can establish a SEP plan with a simple, one-page form. Plan contributions are deducted on Form 1040, Schedule 1, on the line for self-employed SEP, SIMPLE, and qualified retirement plans. Contribution limits vary by plan type, and the IRS adjusts the maximums annually.
- Self-Employment Tax
Self-employed folks and small business owners must pay Social Security and Medicare taxes. The IRS treats the employer portion of the self-employment tax as a business expense and allows you to deduct it accordingly.
- Home Office
The cost of any workspace that is part of your home, used regularly and exclusively for your business, whether you rent or own it, can be deducted as a home office expense. Use the simplified option which is quick and easy: multiply your office’s total square feet by $5, up to 300 square feet. $1,500 is the maximum you can claim.
- Health Insurance Premiums
If you’re self-employed and you pay for your health insurance premiums, you can deduct all your health, dental, and qualified long-term care (LTC) insurance premiums. This is not an itemized deduction; instead, it’s an adjustment to income. That means you don’t have to itemize to claim it.
- Internet and Phone Bills
You can deduct the business portion of your phone and internet expenses, not your entire monthly bill. These expenses shouldn’t be included as a cost of using your home for business, but deducted separately on the appropriate form or schedule.
- Meals
A “reasonable” meal is a tax-deductible business expense when you are traveling for business, at a business conference, or entertaining a client, although entertainment expenses per se are generally not tax deductible. When traveling, you can either deduct 50% of the meal’s actual cost, or 50% of the IRS standard meal allowance.
- Travel
Business travel must last longer than an ordinary workday, require rest, and take place outside the city where your business is located to qualify. You must engage in business activities while you’re on the road. Deductible travel expenses include the cost of transportation to and from your destination, lodging, and meals (see above).
- Vehicle Use
Your expenses are tax deductible when you use your car for business. You can calculate your deduction using either the standard mileage rate determined annually by the IRS or your actual expenses, which is more difficult. The standard mileage rate is $0.70 per mile for 2025.
- Interest
Interest on a business loan from a bank is a tax-deductible business expense. Credit card interest is deductible when the interest applies to business purchases.
- Dues and Publications
The cost of specialized magazines, journals, and books directly related to your business is tax deductible, as are dues for professional membership organizations.
- Education
Education expenses must be related to maintaining or improving your skills for your existing business to be deductible, classes to prepare for a new line of work are not. It includes: tuition, books, lab fees, supplies, and transportation.
- Business Insurance
You can deduct your premiums for insurance to protect your business, such as fire insurance, credit insurance, car insurance on a business vehicle, or business liability insurance.
- Startup Costs
You can deduct up to $5,000 in business startup costs in the first year for things like market research and travel-related expenses, advertising, attorney and accountant fees. You can also deduct up to $5,000 more in organizational costs, state filing fees and legal fees if you set up a corporation or LLC. Equipment or vehicles aren’t startup costs, but can be depreciated or amortized as capital expenditures.
- Advertising
If you pay for Facebook or Google ads, billboards, TV commercials, or mail fliers, the costs that you incur to advertise your business are tax deductible.
- Office Supplies
You can deduct the cost of copy paper, postage, paper clips, printer ink, and pens.
Reach out to us: This is just the tip of the iceberg! There are more complex deductions available like the Qualified Business Income (QBI) Deduction, but we’ve shared some of the biggest and the best here. For more information, consult with our TFG CPAs.
