Tax Deductions for the Self-Employed

Self-employment tax deductions can reduce how much independent workers pay in federal taxes by offsetting common business expenses. These deductions apply to costs such as health insurance premiums, retirement contributions, home office use and vehicle expenses. These write-offs apply only when they meet IRS criteria related to the taxpayer’s profession. Knowing what qualifies can affect how much of your income remains taxable.

Consider speaking with a financial advisor about your tax strategy and ways to potentially improve it. Connect with an advisor who serves your area.

1. Self-Employment Tax Deduction

Normally, employees and their employers each pay half of FICA taxes, which cover Medicare and Social Security. Self-employed workers pay the full 15.3% tax. However, the IRS treats the employer portion as a deductible expense. This deduction for the self-employment tax is an above-the-line deduction. That means you can claim it on your income tax return (Form 1040) regardless of whether you’re itemizing your deductions.

2. Self-Employed Health Insurance Deduction

If you’re self-employed, the dental, health and long-term insurance premiums that you paid for yourself, your spouse and your dependents may be tax-deductible. You may be able to claim the health insurance deduction for a child under 27 as well, even if he or she isn’t considered a dependent.

You’re ineligible for the health insurance deduction if you could’ve enrolled in an employer’s healthcare plan (like your spouse’s plan). You must meet certain conditions, such as showing a net profit or being a more-than-2% shareholder in an S corporation.

Since it’s an above-the-line deduction, you can claim the self-employed health insurance deduction on your tax return.

3. Home Office Deduction

The home office tax deduction allows you to deduct a portion of the expenses you use exclusively for business purposes at home, like property taxes and utilities. Claiming this deduction won’t be easy, however. You’ll need to crunch some numbers and provide proof that you have a space that you use regularly for professional reasons only. Claiming this deduction sometimes triggers a tax audit.

4. Tax Deduction for Business Use of a Car

You may qualify for a deduction if you drive your car for a business or work-related purpose. There are two ways to figure out how much you can deduct. You can use the standard mileage rate or add up your actual expenses. Trying out both methods could be a good idea if you’re not sure which one will offer the biggest deduction.

The standard mileage rate is 70 cents per mile for tax year 2025, up from 67 cents per mile in 2024. You can apply that to all of the business miles you drove in tax year in either year. Just be sure to keep a mile log in case the IRS wants to audit your tax return. The actual expense method includes depreciation, insurance, maintenance and gas

5. Self-Employed Retirement Plan Deductions

The government encourages all workers to save for retirement. And there’s another good reason to build your nest egg: It could lower your tax bill. Self-employed workers can qualify for tax deductions by making contributions to SIMPLE IRAs and SEP-IRAs. They can also take advantage of other tax-deferred plans like individual 401(k) accounts.

6. Deduction for Education Expenses

Other business expenses may be tax-deductible, including the money you spend to gain new skills or improve your craft. Just know that you can only get a tax deduction for the expenses that relate to your current professional path. You can’t get a tax write-off for trying to pursue a new career.

If you decide to go back to school, you may qualify for the Lifetime Learning Credit. It’s worth up to $2,000.

7. Deduction for Business Loan Interest

If you took out a loan, the interest you paid or that accrued over time may be tax-deductible as a business expense. But certain rules apply. For example, you must be liable for the debt you took on. And the loan interest you’re trying to write off cannot come from a personal loan.

In general, business expenses must be “necessary and ordinary” to be tax-deductible. An ordinary expense is defined by how common it is for someone in your industry. A necessary expense is one that’s appropriate for your business or trade.

Bottom Line

Self-employed individuals often have access to a range of deductions that can reduce taxable income and improve overall cash flow. From health insurance premiums to vehicle expenses and retirement contributions, these deductions apply to common costs tied to earning income independently. Eligibility rules and calculation methods vary. Keeping detailed records helps determine how much tax you may owe. Exploring these options can lead to a more accurate and favorable tax outcome without relying on itemized deductions.

Tax Season Tips

Get organized. Tax season will be much less of a headache if you have all of your documents in order and a clear idea of how much you’ll owe.
Aside from deductions, another way to potentially save money next tax season is by working with a financial advisor. A financial advisor can help you draw up a financial plan to minimize your tax burden. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.