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ResourcesAccounting and Taxes

17 Self-Employed Tax Deductions for Freelancers and Small Business Owners

Discover the top tax deductions for freelancers that can save you thousands.
Accounting and TaxesNovember 27, 2023

Wondering how to pay less taxes as a freelancer? The trick is simple: track and deduct your business expenses. Every purchase you make for your business is likely deductible on your taxes—and every deduction you take lowers your taxable income. Less taxable income means a smaller tax bill. It’s that simple. 

17 Tax Deductions You Can Claim As a Freelancer

While the Internal Revenue Service (IRS) doesn’t have a pre-approved list of expenses that you can definitely deduct, you’ll know that a purchase is deductible if it’s both ordinary and necessary for your business; in other words, if it’s both 1) typical for your line of work, and 2) essential to doing your job well.

Here are 17 common self-employed tax deductions you might write off:

Common tax write-offs for freelancers and self-employed sole proprietors

1. Phone and Internet Expenses

If you’re freelancing, you likely use your internet and cell phone for work. But did you know you can deduct the “business portion” of those bills and write them off on your taxes? For example, if 50% of your phone use is for work, you can deduct 50% of the bill. 

The key is to determine what percentage of your internet and phone services is for business purposes versus personal use. It’s okay to use an informed estimate for this number. 

You can also deduct any extra charges to your bill that result from your business. For example, if you incurred international charges while traveling for work, or increased your phone’s data plan so you could use your phone for work, then those charges are 100% deductible.

Eligibility: If you use your phone or internet for work, you can deduct the business portion when you file your taxes. So if your phone bill is $100 per month and 50% of your phone usage is for business, you can write off $50. 

2. Software and Online Services

If you’re paying for any work-related software subscriptions or memberships, you can deduct those! Design software like Adobe Creative Cloud, invoicing and accounting services like QuickBooks, online tools like Slack, and any other software you may use to run your business. 

Memberships also count as deductible expenses. So if you’re part of any professional organizations, like trade associations and real estate boards, keep track of those fees. But it typically doesn’t include things like country club dues

Eligibility: You can only deduct the portion of subscriptions that you use for work. If you use your Adobe account for work 75% of the time and use it for personal projects 25% of the time, make sure you only deduct 75% of the bill. Professional membership fees are fully deductible, but things like country clubs usually don’t count. They have to be directly related to your business.

3. Office Supplies

Office supplies are items you use regularly for your freelance work, like paper, pens, ink, envelopes, and even bigger items like a laptop or printer. (Yes, you can likely write off a laptop as a freelancer, so say hello to that new Macbook Air.) Keep receipts for all purchases and record how you use them in your business. 

Eligibility: The supplies must be necessary and ordinary for your type of work. For more expensive items like laptops, you may need to depreciate the cost over several years, depending on tax rules.

4. Home Office Deduction

The home office deduction allows you to write off expenses for using a part of your home exclusively for your freelance business. This can include a portion of your rent or mortgage, utilities, home or renters' insurance, and even home maintenance.

There are two home office deduction methods you can use to calculate how much you can write off: 

  • Simplified method. Deduct a standard $5 per square foot of your home office, up to 300 square feet.

  • Regular method. Calculate the percentage of your home used for business (e.g., if your office is 10% of your home's total square footage, you can deduct 10% of qualifying expenses). 

Keep utility bills, rent and mortgage statements, and receipts for home maintenance. Come tax time, use Form 8829 (Expenses for Business Use of Your Home) to calculate and claim the deduction.

Eligibility: You must have a specific area of your home used “regularly” and “exclusively” for business. It doesn't have to be a whole room; a dedicated desk area can qualify too, as long as it’s only for work. For instance, a dining room table wouldn’t qualify if it’s also used for meals.

5. Contract Labor

Freelancers often hire 1099 contractors for specialized tasks outside their expertise, for work overflow, or for tasks that help grow their business but they don't have time to do it themselves. For example, if you're a freelance writer, you might hire a graphic designer for your website or an editor for your articles. 

Eligibility: You can write off payments to 1099 contractors as business expenses, as long as the work is directly related to your business operations.

How to do it: Keep a record of all payments made to contractors. If you pay a contractor more than $600 in a year, you're required to issue them a Form 1099-NEC. Report these expenses on Schedule C of your tax return under the 'Contract Labor' section.

Pro tip: Make taxes easier next year by creating your 1099-NECs with Found. 

6. Vehicle Expenses

If you use your car for work purposes, then a portion of your car expenses is deductible. For example, if you track your miles and realize 40% of the miles you put on your car this month were from work trips, 40% of your car-related expenses like gas, car payments, car insurance, maintenance, and a few others are deductible.

The IRS also gives you the option of deducting your mileage, instead of adding up all of your car expenses from the entire year. The standard mileage method involves counting up the miles that you drove for work and deducting a flat rate for each mile. In 2023, the IRS business mileage rate is 65.5 cents.

7. Marketing and Advertising

Promoting your freelance business is part of being a business owner! The good news is, any marketing and advertising expenses you incur are deductible as a business expense. These expenses could include your website, social media ads, business cards, flyers, email marketing services, and even SEO (Search Engine Optimization) services.

Eligibility: The marketing and advertising must be directly related to your business. The intent should be to attract new clients or retain existing ones.

8. Business and Health Insurance Premiums

Insurance is a major expense when you’re freelancing. Luckily, you can write off premiums for self-employed health insurance, including dental and vision. You can also write off premiums for business insurance, including professional liability or property insurance policies.

Eligibility (for health insurance): You’re eligible for a health insurance tax break as long as you’re self-employed, paying for your own healthcare, and weren’t offered coverage from an employer or on a spouse’s health plan. You take the deduction on your personal tax return as an adjustment to income. (This is known as an “above-the-line” deduction.) 

Eligibility (for business insurance): You can deduct premiums as long as they’re directly related to your freelance work. Similar to other deductions for freelancers, you’ll claim them as a business expense on your Schedule C

9. Business Travel

Traveling somewhere for work? Plane and train tickets, rental cars, hotels, taxis, and other forms of transportation and lodging are deductible as business expenses.

You can also deduct other travel costs like dry cleaning, shipping costs for any materials you’ll need to bring, or tips related to the travel services you may use.

Eligibility: The IRS has a few rules about business travel deductions. Your expenses can’t be “lavish or extravagant,” meaning you shouldn’t try to deduct expenses that were far more expensive than they needed to be, or weren’t directly related to your work; for example, booking spa treatments at your hotel wouldn’t be considered “ordinary and necessary” for your work.

10. Business Meals

You may choose to meet with clients (or potential clients) over coffee or a meal, or you may pay for meals while traveling for work. With a few guidelines, you can deduct meal expenses that are directly related to your work.

Unlike other deductions, you can only deduct 50% of the cost of the meal. Also, the same “lavish or extravagant” rule that applies to travel also applies to meals; the meal expense for a client meeting has to be reasonable for your industry and for the context of the meeting. Meals paid for while traveling need to be reasonable for the area you’re traveling to.

Eligibility: The meal should be with a current or potential business client, consultant, or employee, and the environment must be conducive to business discussions. So you usually can’t deduct that oat milk latte you sip on while working solo from a coffee shop. 

11. Professional and Legal Services

Another common tax deduction for freelancers is the ability to write off professional and legal services. So if you hire a CPA for accounting or a lawyer for a business contract, these are deductible expenses. 

Eligibility: The services must be directly related to your business operations and necessary for your work.

12. Training and Education Deduction

Education and training deductions are a boon for freelancers. They allow you to reduce your tax burden at the cost of improving your business skills. (Win, win.) So if you sign up for any workshops, courses, or training programs—or buy any books that enhance your professional skills or industry knowledge—they’re a self-employed tax deduction! 

Eligibility: Your training and educational expenses must be relevant to your current business and aim to improve your skills or expertise in your field. For instance, a graphic designer could write off a design workshop or an online marketing course.

13. Interest on Business Loans and Credit Cards

If you have a loan or credit card that you use specifically for business purposes, you can deduct your paid interest. Maybe you took out a loan to buy a new computer for your freelance work or used a credit card to cover business travel expenses. In both cases, you can deduct interest on these loans or credit card charges.

Eligibility: The loan or credit card must be used solely for business purposes, not personal expenses. It doesn’t matter if it’s technically advertised as a “personal” credit card or loan. As long as it's solely used for business-related expenses, it works. 

14. Retirement Plan Contributions

Deducting retirement contributions is a powerful way to save for the future while also reducing your taxable income. You can deduct contributions made to several types of retirement plans, including traditional IRAs, SEP IRAs, and Solo 401(k)s. 

Eligibility: The contributions must be to a qualified retirement plan and within the annual contribution limits set by the IRS. You can’t contribute more than you earn. 

15. Qualified Business Income Deduction

The Qualified Business Income Deduction (QBI) allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income. Essentially, this deduction reduces the taxable income from your business and potentially lowers your overall tax bill. 

It's specifically designed for "pass-through entities," which means businesses where the income "passes through" to the owner's personal tax return. This includes sole proprietorships, partnerships, S corporations, and some LLCs. 

Eligibility: It's available to most self-employed individuals and small business owners, but there are income thresholds and limitations based on your type of business and total income. It's complex, so consult a tax professional or use sophisticated tax software to accurately calculate and claim this deduction.

16. Bank Fees

Bank fees are some of the most common self-employed tax deductions. Maybe it’s a monthly service fee, transaction fee, or overdraft fee when your account dips below zero. Regardless, you can deduct these bank fees from your taxable income.

Eligibility: The fees must be from a bank account used exclusively for business purposes. Always have a separate bank account for your business. This makes tracking and justifying the deductions to the IRS easier. 

Found is an all-in-one banking platform for freelancers that’s free to join. We even track your freelance tax deductions and write-offs for you!

17. Startup Costs Deduction

Startup costs include expenses you incurred as you set up your freelance business, but before you begin operating. This includes market research, advertising, legal fees, and consultant fees. 

For example, if you decided to make the jump to self-employment during a recession—and you paid for branding, website setup, or legal consultation for your business structure during the process—these may be deductible.

Eligibility: These costs must be related to starting your business and would otherwise be deductible as a business expense. On your tax return, you can deduct up to $5,000 in startup costs in the first year of business; additional costs can be amortized over several years. 

How to organize and track your expenses

Accurately tracking expenses is the name of the game when it comes to maximizing your tax deductions as a freelancer. No one wants to be scrambling at tax time because they can’t remember their expenses. To avoid common tax mistakes, use these tips:

  1. Separate personal and business expenses. Use different bank accounts and credit cards for personal and business transactions. Don’t co-mingle! This separation makes it easier to identify which self-employed tax deductions you qualify for.

  2. Go digital with receipts. Instead of hoarding paper receipts, scan or take photos of them. Digital copies are easier to organize and can be conveniently accessed. Tools like cloud storage or expense tracking apps help in categorizing and storing these digitally.

  3. Consider Found for seamless expense tracking. With Found, you can effortlessly track your expenses, categorize transactions, and even estimate taxes. It's a comprehensive solution that takes the hassle out of bookkeeping. Signing up for Found means one less thing to worry about, ensuring nothing falls through the cracks.

Let Found Find Your Tax Deductions

Remember—if you incur any type of business-related expense — whether it's education costs or professional fees for business memberships, it’s very likely a business deduction as long as it’s “ordinary and necessary.” As always, consult a tax expert if you have specific questions about self-employment taxes and ways you can reduce them. 

If you use Found for your business bank account, remember to use your Found card for these purchases! That way, your business expenses will be automatically tracked for you, making you less likely to forget a deduction and leave money on the table. Not using Found? Sign up for free here.

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Disclaimer: The information on this website is not intended to provide, and should not be relied on, for tax advice. Found partners with TurboTax, and is not a filing service. Restrictions may apply, see TurboTax terms.

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