Being self-employed is incredibly rewarding, but it also comes with its own set of challenges, especially when it comes to taxes. With so many new ways to work independently for yourself, many are approaching 1099 taxes for the first time ever in 2025.
One of the most significant advantages of self-employment is the ability to deduct certain business expenses from your taxable income. The IRS is does not want to tax your total earnings, they only want to tax your business profits. They understand it costs money to run a business. This is where tax write-offs come into play, and understanding these deductions can save you a lot of money.
A few things to note:
1. SE deductions have has nothing to do with your personal income taxes. So if you take the 2025 standard deduction on your personal taxes, you can and should still itemize your business expenses on your 1099 tax filing.
2. In order for something to be considered a qualified business expense (and therefore tax-deductible), it must be an ordinary and necessary business expense. For example, staying at a hotel while you’re on a business trip for a conference relevant to your job is an ordinary and necessary expense, but taking yourself to a Dead & Co show at the Sphere while you're on your business trip is probably not.
3. Please remember that this is generalized advice, and may not apply to every individual. If you have questions about your specific tax situation, you should consult a tax professional.
Now let's get to it.
If you use your car for business purposes, you can deduct vehicle expenses. There are two methods to calculate this deduction: the standard mileage rate and actual expenses.
The IRS sets a standard mileage rate each year. This method is straightforward and requires you to keep a log of your business miles driven.
The actual expense method involves deducting the actual costs of operating your vehicle, including gas, maintenance, insurance, and depreciation. This method can be more beneficial if you have high vehicle expenses.
Every self-employed individual needs supplies to run their business. This can include anything from office supplies like paper and pens to software subscriptions and tools specific to your trade. Depending on the nature of your business, you might also require specialized equipment, such as a high-quality camera for photographers or a reliable computer for graphic designers. Investing in the right tools not only enhances productivity but also contributes to the overall quality of your work, which can lead to increased client satisfaction and repeat business.
It’s essential to keep receipts and track your expenses throughout the year. This will make it easier to claim these deductions when tax season rolls around. Consider using an expense tracking app to help manage your finances. Many of these programs offer features that allow you to sync a card to get an automatic feed of expenses, categorize them work or personal, generate reports, and even scan for any potential deductions you missed. By maintaining meticulous records, you not only simplify your tax preparation process but also gain a clearer understanding of your business's financial health.
Furthermore, understanding the different categories of business supplies can aid in strategic planning. For instance, distinguishing between essential supplies and discretionary spending can help you allocate your budget more effectively. Essential supplies are those that are critical for day-to-day operations, while discretionary items may enhance your workspace or workflow but are not strictly necessary. Regularly reviewing your supply needs can also lead to cost-saving opportunities, such as bulk purchasing or finding alternative suppliers, ultimately contributing to a more sustainable business model.
This is probably the most common self-employment tax deduction. When you’re filing your taxes, the Schedule SE (Form 1040 or Form 1040-ES) will help you calculate your deduction for this.
In short, all self-employed individuals have to pay the self-employment tax, which is currently set at a tax rate of 15.3%. If you’re employed by a company, the company pays half (7.65%) and the employee pays half (7.65%). However, when you’re self-employed, you’re responsible for the entire portion.
The good news is that you can deduct up to 50% of what you paid in self-employment taxes in figuring your gross adjusted income (which means you’ll have a lower income tax bill). This is meant to adjust for the 7.65% that would ordinarily be paid by your employer.
If you work from home, you may qualify for the home office deduction. This allows you to deduct a portion of your home expenses, such as rent or mortgage interest, utilities, and internet costs, based on the size of your office space compared to your entire home. This deduction can significantly reduce your taxable income, making it a valuable benefit for remote workers and freelancers alike. However, it’s important to keep accurate records of your expenses to substantiate your claims in case of an audit.
To calculate the home office deduction, you can use two methods: the simplified method or the regular method. The simplified method allows you to deduct $5 per square foot of your home office, up to a maximum of 300 square feet. This method is straightforward and requires minimal record-keeping, making it a popular choice for many. On the other hand, the regular method requires more detailed calculations but can yield a larger deduction if you have significant home expenses. This method involves calculating the actual expenses related to your home office, including a percentage of your mortgage interest, property taxes, and even depreciation. It’s essential to weigh the pros and cons of each method to determine which one maximizes your deduction.
To qualify, your home office must be used regularly and exclusively for business purposes. This means that the space cannot double as a personal area, like a guest bedroom or family room. Additionally, the IRS requires that your home office be your principal place of business, or a place where you meet clients or customers in the normal course of your business. If you operate a business that requires significant equipment or inventory, having a dedicated space can also bolster your eligibility for this deduction. Understanding these requirements is crucial, as misclassification can lead to denied deductions or penalties.
Moreover, it’s worth noting that the home office deduction is not just limited to traditional office setups. Many creative professionals, such as artists or writers, may have unique workspaces that qualify. Even if your office is a corner of your living room or a converted garage, as long as it meets the IRS criteria, you can benefit from this deduction. Keeping a detailed log of your workspace usage and expenses can help ensure you’re maximizing your potential deductions while also providing clarity in the event of a tax review.
If you use your phone or internet for business, you can deduct a portion of these expenses. This is especially relevant for self-employed individuals who work remotely.
To determine the deductible amount, you can calculate the percentage of time you use these services for business versus personal use. Keep detailed records to support your claims. For example, if you use your internet for 6 hours a day for work, and 4 hours a day for personal use, you should deduct only 60% of your internet bill on your taxes.
If you pay for your own health insurance as a self-employed worker, any health insurance premiums you pay out of pocket for policies covering medical care are tax-deductible. A few caveats apply:
These are technically an adjustment to your income rather than an itemized deduction—so you can claim these even if you’re not itemizing deductions. Instead, you’ll deduct the amount you paid from your income to lower your adjusted gross income, and therefore, lower your tax bill.
For more details, check the IRS website.
Contributing to a retirement plan is not only a smart financial move but also a great way to reduce your taxable income. Self-employed individuals can set up plans like a SEP IRA or a Solo 401(k).
For 2025, the contribution limits for a SEP IRA are expected to be $66,000 or 25% of your net earnings, whichever is less. Solo 401(k) plans have even higher limits, allowing for both employee and employer contributions.
On the road for work? If you’re traveling long distances, you can deduct more than just your mileage. Business meals, transportation costs (like mileage, flight costs, train tickets, Uber costs), lodging and more are all deductible.
In order for a trip to qualify as a business expense, it needs to meet at least the following criteria:
Your business travel expenses (aside from meals) are 100% tax-deductible, but keep in mind they must be reasonable and necessary expenses, and must meet the above criteria. Keep especially careful records, as the IRS often checks these very carefully.
Promoting your business is essential, and fortunately, many marketing and advertising expenses are fully deductible. This includes costs for online ads, printed flyers, business cards, promotional swag, and even paid sponsorships for events or newsletters.
Online advertising can be especially powerful for small businesses and independent workers. Whether you’re running Google Ads, Instagram promotions, or boosting posts on Facebook or LinkedIn, these costs count as deductible marketing expenses. Just be sure they are directly tied to your business. If you’re a graphic designer advertising your portfolio or a driver promoting your services, you’re in the clear.
Hiring professionals can elevate your business, and their fees are deductible. This includes accountants, legal advisors, consultants, virtual assistants, and contractors. Even a freelance copywriter who helps you build your website or an editor for your client-facing documents qualifies.
When choosing who to work with, focus on quality and relevance to your business. Hiring a tax pro who understands self-employment can help you avoid mistakes and maximize deductions. Likewise, if you’re investing in legal help, make sure they specialize in small business or your industry.
If you’ve completed any training, ongoing education, courses or the like to continue your career or business in the past year, you can deduct the cost of these training or courses from your taxes.
In order to count as a qualified expense, the training must be related to your current role (i.e. not upskilling or training for a career change). According to the IRS, any such training or education must “maintain or improve skills needed in your present work.”
You can deduct educational expenses including:
If you buy expensive equipment or assets for your business, you might not deduct the entire cost in one year. Instead, you spread the deduction out over time through depreciation. This applies to things like computers, phones, cameras, furniture, or even a vehicle used for business.
The IRS offers different depreciation methods. Straight-line is the most common and spreads the deduction evenly across several years. Accelerated depreciation allows you to deduct more upfront. Talk to a tax professional to decide which works best for your situation.
Insurance helps protect your business and your income, and the good news is that most insurance premiums are deductible. This includes general liability, professional liability (like E&O), property insurance, cyber insurance, or even insurance for business equipment.
Deductible policies include:
If you’re just starting your business, you can deduct up to $5,000 of start-up costs in your first year.
This includes:
These costs can pile up quickly, so make sure to track them as soon as you begin building your business.
Keep track of all your start-up expenses, as they can add up quickly. Proper documentation will help you claim these deductions when you file your taxes.
Many businesses require licenses or permits to operate legally. The costs associated with obtaining these licenses are fully deductible.
Depending on your industry, you may need various licenses, such as a business license, professional license, or health permits. Ensure you keep receipts for these expenses.
Leased office? Retail space? Even equipment? Deduct it. Monthly rent for commercial space or short-term equipment leases are both deductible business expenses.
Keep a copy of your lease and payment receipts to substantiate the deduction. If you share space or sublease, you can only deduct your portion.
Many self-employed individuals rely on software to run their businesses. Subscriptions to software tools, whether for accounting, design, or project management, are deductible expenses.
Investing in the right software can streamline your operations and improve efficiency. Look for tools that offer the best value for your specific business needs.
If you use tools like PayPal, Stripe, or have a business checking account with monthly fees, those charges are deductible. Just make sure they’re tied to your business activities.
Also included:
If you give gifts to clients or customers, you can deduct up to $25 per person per year. This can be a nice way to maintain relationships while also benefiting your tax situation.
When selecting gifts, consider items that are meaningful and relevant to your clients. This can help strengthen your business relationships.
Membership dues for professional organizations or trade associations are deductible. Being part of these groups can provide networking opportunities and valuable resources. Research organizations that align with your industry and business goals. Membership can often provide access to exclusive resources, training, and networking events.
Examples of deductible dues:
Not deductible: Social clubs or country clubs.
For self-employed parents, childcare expenses can be a significant cost. While not a direct deduction, you may qualify for the Child and Dependent Care Credit, which can reduce your tax bill.
To qualify, you must pay for childcare while you work or look for work. Keep track of all childcare expenses and ensure you meet the eligibility criteria for the credit.
The Qualified Business Income (QBI) deduction allows self-employed individuals to deduct up to 20% of their qualified business income. This can significantly reduce your taxable income.
To qualify for the QBI deduction, your business must be a pass-through entity, such as a sole proprietorship, partnership, or S corporation. It’s essential to understand the rules to maximize this deduction.
Fees paid to a tax professional for preparing your business taxes are also deductible. This includes costs for tax software if you prepare your own taxes.
When selecting a tax professional, look for someone who has experience working with self-employed individuals. They can help you navigate deductions and ensure you are compliant with tax laws.
If you have taken out a loan to finance your business, the interest paid on that loan is deductible. This can help reduce your taxable income significantly.
Review your loan agreements to understand the interest rates and terms. Keeping accurate records of interest payments will help when claiming this deduction.
If your business makes charitable contributions, these can also be deductible. This includes donations to qualified charitable organizations.
Keep records of all donations, including receipts and acknowledgment letters from the charities. This documentation is essential for claiming the deduction on your taxes.
Understanding and utilizing these self-employed tax deductions can make a significant difference in your overall tax liability. By keeping accurate records and staying informed about the deductions available to you, self-employed individuals can minimize their tax burden and keep more of their hard-earned money.
As tax laws can change, it's always wise to consult with a tax professional to ensure you're taking advantage of all available deductions and complying with current regulations. With the right knowledge and planning, self-employment can be a financially rewarding endeavor.
Thankfully, Everlance can help you find and claim business expenses and deductions you might have otherwise missed. Everlance’s Instant Deduction Finder scans your lists of transactions and expenses for potential deductions, and populates a list for you to review. Once you’ve reviewed your potential deductions, you can get an IRS- or accountant-ready report of your eligible deductions.
Even better: Everlance can help you effortlessly track mileage and business expenses throughout the year so you’re all ready come tax time. Track mileage automatically for every business drive, manage expenses and more, all in one convenient app.
Download Everlance for Google Play or iOS today!
Everlance helps over 4 million independent workers save thousands every year by automatically tracking every deduction
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Brad Thibeau is the Head of Growth & Partnerships at Everlance. Brad has worked at Everlance since 2021 with a focus on helping self employed people save time and money on their taxes.
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