If you're self-employed, you can write off any expense that's ordinary and necessary to run your business — meaning it's common in your line of work and genuinely helps you earn income. That covers the obvious stuff (software, supplies, a portion of your phone and internet) and a lot of things beginners overlook (half your self-employment tax, retirement contributions, health insurance premiums, mileage, and startup costs). The catch: you can only deduct the business-use portion, and you need records that prove it.

Below is the full categorized checklist, the deductions people leave on the table every year, the traps that get returns flagged, and exactly how to split mixed personal-and-business expenses.

The quick rule that decides everything

Before any specific deduction, the IRS uses one test: the expense must be ordinary (normal for your trade) and necessary (helpful and appropriate). It does not have to be indispensable. A graphic designer's Adobe subscription? Ordinary and necessary. A graphic designer's boat? No.

Two more things to internalize:

  • Personal expenses are never deductible. Your regular commute, your gym, your everyday clothes — even if you "feel more productive" — don't count.
  • Mixed-use expenses get split. If you use something for both business and personal life (phone, car, home), you deduct only the business percentage. More on the math below.

For the IRS's plain-English overview, see the Guide to business expense resources.

The full self-employed deduction checklist (2026)

Most self-employed deductions land on Schedule C. Here's the working list — print it and check it against your bank statements before you file.

Operating the business

  • [ ] Business software and subscriptions (design tools, accounting apps, project management)
  • [ ] Website, hosting, and domain costs
  • [ ] Office supplies and postage
  • [ ] Bank fees and merchant/processing fees (Stripe, PayPal, Square)
  • [ ] Contractor and freelancer payments you make to others (issue a 1099-NEC if you pay someone $600+)

Getting clients

  • [ ] Advertising and marketing (ads, business cards, promo materials)
  • [ ] Logo and branding design
  • [ ] Email marketing and CRM tools

Knowledge and money management

  • [ ] Courses, books, and training that maintain or improve current skills
  • [ ] Professional memberships and trade publications
  • [ ] Accountant, bookkeeper, and tax-prep fees (for the business portion)
  • [ ] Business insurance (liability, professional/E&O)

The big-ticket, frequently-missed ones

  • [ ] Home office (see below)
  • [ ] Vehicle/mileage (see below)
  • [ ] Health insurance premiums (self-employed health insurance deduction)
  • [ ] Retirement contributions (SEP-IRA, Solo 401(k), SIMPLE IRA)
  • [ ] Half of your self-employment tax (automatic adjustment on Schedule 1 — many beginners don't realize this is built in)
  • [ ] Startup costs (up to $5,000 in year one)
  • [ ] Phone and internet (business portion)
  • [ ] Equipment: laptop, camera, printer, tools

If you're not tracking these throughout the year, you'll forget most of them by April. A simple system makes this painless — here's bookkeeping for solo business owners if you want a starting point.

How to split mixed-use expenses (with real numbers)

This is the part every list-style article skips, and it's where the actual money is. For anything you use personally and for business, you deduct a defensible percentage.

Phone and internet

You can't deduct 100% of a phone you also text friends on. Pick a reasonable business-use percentage and apply it.

Example: Your phone bill is $90/month ($1,080/year). You estimate 60% business use. Deduction = $648. Your home internet is $75/month ($900/year), 40% business use = $360.

Keep a note explaining how you arrived at the percentage. You don't need a stopwatch, but you do need a logic you can repeat next year.

Vehicle: standard mileage vs. actual expenses

You have two methods, and you generally pick one.

Standard mileage Actual expenses
How it works Multiply business miles by the IRS rate Total your real car costs, then multiply by business-use %
2026 rate 72.5 cents/mile N/A — you add up gas, insurance, repairs, depreciation, etc.
Best for High miles, fuel-efficient or paid-off cars Expensive cars, low MPG, heavy repair costs
Records needed A mileage log (date, miles, purpose) Every receipt + total annual miles

Example: You drive 6,000 business miles in 2026. Standard mileage = 6,000 × $0.725 = $4,350. If your total car expenses were $9,000 and the car is 40% business use, actual method = $3,600. Here, standard mileage wins.

The 2026 business rate is 72.5 cents per mile (IRS announcement). Important rule: if you want the option to switch methods later, you must use standard mileage in the first year the car is in service. And your commute from home to a regular workplace never counts — only business trips do.

Home office

You qualify only if a part of your home is used regularly and exclusively for business. A spare room you work in daily counts. The kitchen table where the family also eats dinner does not — that fails the "exclusive" test. (This answers a common worry: occasional personal use of the space breaks the deduction, so keep the area dedicated.)

Two methods:

  • Simplified: $5 per square foot, up to 300 sq ft = $1,500 max. No receipts, no depreciation.
  • Regular: Deduct the business percentage of rent/mortgage interest, utilities, insurance, and repairs. If your office is 200 sq ft of a 1,600 sq ft home, that's 12.5% of those costs.

Example: 200 sq ft office. Simplified = 200 × $5 = $1,000. Regular method on $24,000/year of home costs × 12.5% = $3,000. The regular method is worth the extra paperwork here.

The four deductions beginners underuse most

These move the needle far more than another software subscription.

  1. Self-employed health insurance. If you pay your own premiums and aren't eligible for a spouse's or employer's plan, you can deduct them as an above-the-line adjustment. Key edge case: you're disqualified for any month you could have joined your spouse's subsidized employer plan — even if you declined it. So if your spouse has employer coverage, check whether you were eligible before claiming this.

  2. Retirement contributions. This is the single biggest legal lever for most self-employed people. Compare your two main options for 2026:

    Plan 2026 limit Who it's best for
    SEP-IRA 25% of net SE earnings, up to $72,000 Simple setup; you need ~$288k income to hit the cap
    Solo 401(k) Employee deferral $24,500 + employer 25%, up to $71,500 (under 50) High earners and lower earners alike — you reach big numbers at lower income

    The under-appreciated point: a Solo 401(k) lets you contribute as both "employee" and "employer," so a $60k freelancer can sock away far more than the same person could with a SEP-IRA. SEP-IRAs can be opened up to your tax-filing deadline (including extensions); a Solo 401(k) generally must be established by year-end, so don't wait until April.

  3. Half of your self-employment tax. You pay 15.3% SE tax on net earnings, but you deduct half of it automatically. It's built into the form — just don't forget it exists.

  4. Startup costs. You can deduct up to $5,000 of startup costs in your first year (the rest amortizes over 15 years). This covers market research, pre-launch advertising, and professional fees you paid before you officially opened. New to all of this? Start with self-employment taxes for the first time.

What does NOT qualify (the guardrails)

Knowing what to skip keeps you out of trouble.

  • Your commute. Home to a regular work location is personal.
  • Everyday clothing. Deductible only if it's a genuine uniform or protective gear unsuitable for street wear. A nice blazer for client meetings is not deductible.
  • The full cost of client meals. Business meals are generally 50% deductible (you and a client at lunch = half). The temporary 100% restaurant deduction expired after 2022. Entertainment — concert tickets, golf rounds — is 0% deductible.
  • Personal use of anything. Only the business slice of mixed-use items.
  • Hobby expenses. This is the trap below.

The hobby-loss trap

If the IRS decides your activity is a hobby, not a business, you can't deduct losses against other income. The safe harbor: if you turn a profit in 3 of the last 5 years, the IRS presumes you're a real business. Miss that, and you have to prove a genuine profit motive. Factors they weigh include whether you keep businesslike records, market your services, depend on the income, and adjust your methods to improve profitability. Side-hustlers and creators: keep clean books and a separate business account — that documentation is your defense.

Recordkeeping so your deductions survive scrutiny

A deduction you can't document is a deduction you'll lose in an audit. Build this minimum system:

  • Separate business bank account and card. Non-negotiable. It instantly separates business from personal.
  • Save receipts for anything over a small threshold; snap photos and store them in one folder or app.
  • Keep a mileage log with date, miles, and purpose for every business trip.
  • Note the "why" for judgment-call expenses (the meal's business purpose, the phone's business percentage).
  • Hold records for at least 3 years after filing (longer if you under-report significantly).

Use this one-line template per expense so nothing is ambiguous later:

[Date] | [Amount] | [Vendor] | [Category] | [Business purpose / % business use]
2026-03-14 | $90 | Verizon | Phone | 60% business use — client calls + email

Tracking deductions all year also makes your quarterly estimated taxes far more accurate, because you'll know your real profit instead of guessing.

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Frequently Asked Questions

Can I deduct my home office if I also use the space personally sometimes?

No. The home office must be used regularly and exclusively for business. If the same room doubles as a guest bedroom or the kids do homework there, it fails the exclusive-use test. Dedicate a specific area — even a partitioned corner counts — and use it only for work.

Are client meals 50% or 100% deductible for self-employed people?

Generally 50%. The temporary 100% deduction for restaurant meals applied only to 2021–2022 and has expired. Entertainment expenses (sports tickets, golf) are 0% deductible. To claim a meal, keep the receipt and note who you met and the business purpose.

Can I deduct health insurance if my spouse has employer coverage?

Only for months you were not eligible to join your spouse's subsidized employer plan. Eligibility disqualifies you even if you declined the coverage. Check each month carefully — if your spouse's plan was available to you, you generally can't take the self-employed health insurance deduction.

What's better for a high earner, a SEP-IRA or a Solo 401(k)?

For most self-employed people — especially mid and high earners with no employees — a Solo 401(k) usually wins because you contribute as both employee and employer, hitting large totals at lower income. A SEP-IRA is simpler but caps your contribution at 25% of earnings. Remember the Solo 401(k) generally must be opened by December 31.

Can I deduct business startup costs in my first year?

Yes. You can deduct up to $5,000 of qualifying startup costs in your first year of business, with the remainder amortized over 15 years. Qualifying costs include market research, pre-opening advertising, and professional or legal fees incurred before you officially launched.