If you are self-employed in the United States, your deductions are not a nice-to-have. They reduce your income tax and your 15.3% self-employment tax, so a dollar of legitimate business expense is worth roughly 30 to 40 cents to a typical freelancer. Most people who overpay do not do so because they are honest; they do it because they never learned which lines on Schedule C they were entitled to fill in.
This guide covers the 2026 tax year (the return you file in early 2027), with the actual IRS figures confirmed against official sources. Every number below is a 2026 number.
1. What actually makes an expense deductible
The whole system rests on one sentence in Section 162 of the tax code: you may deduct expenses that are ordinary and necessary for your trade or business. "Ordinary" means common and accepted in your line of work. "Necessary" means helpful and appropriate, not indispensable. A photographer's lens is ordinary and necessary. A photographer's boat is not, no matter how many sunset shots you take from it.
Three practical consequences follow, and they explain almost every deduction dispute:
- Mixed-use items must be split. Your phone, your car and your internet connection are partly personal. You deduct the business percentage, and you need a defensible basis for that percentage.
- You need a record, not a memory. The IRS does not require a specific software, but it does require substantiation: receipts, a mileage log, bank and card statements tied to a business account.
- Personal is personal. Making a personal expense useful to your business does not convert it. That is the trap most "write off everything" advice falls into.
Freelancer deductions are claimed on Schedule C (Form 1040). A handful of the biggest ones (health insurance, retirement, half your self-employment tax) are not Schedule C expenses at all: they are adjustments on Schedule 1 that reduce your income tax but not your SE tax. Knowing which bucket an item belongs in changes the arithmetic considerably.
2. The 2026 numbers on one page
These are the thresholds you will actually use. Bookmark this table.
| Item | 2026 figure | Source |
|---|---|---|
| Self-employment tax rate | 15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net profit | IRS |
| Social Security wage base | $184,500 (up from $176,100) | SSA |
| Additional Medicare tax | 0.9% above $200,000 single / $250,000 married filing jointly | IRS |
| Standard mileage rate (business) | 72.5 cents per mile (1 Jan to 30 Jun 2026); 76 cents per mile from 1 July 2026 | IRS |
| Home office, simplified method | $5 per sq ft, max 300 sq ft, cap $1,500 | IRS |
| Section 179 expensing cap | $2,560,000 (phase-out starts at $4,090,000) | IRS Pub 946 |
| Bonus depreciation | 100%, now permanent | IRS Pub 946 |
| Solo 401(k) employee deferral | $24,500 (+$8,000 if 50+, $11,250 if 60 to 63) | IRS |
| Total additions cap (Solo 401(k) / SEP) | $72,000 (compensation cap $360,000) | IRS |
| Traditional / Roth IRA | $7,500 (+$1,100 if 50+) | IRS |
| QBI deduction threshold | $201,750 single / $403,500 joint | IRS |
| Standard deduction | $16,100 single / $32,200 joint / $24,150 head of household | IRS |
| Business meals | 50% deductible; entertainment 0% | IRS Pub 463 |
| 1099-NEC issuing threshold | $2,000 (raised from $600 as of 1 Jan 2026) | IRS |
3. The home office deduction
Two tests, both mandatory: regular use and exclusive use. The space has to be used only for business. A spare bedroom that is a guest room twice a year fails. A corner of the living room where nobody watches TV can pass, because the rule applies to a clearly identifiable space, not to a whole room. Your home must also be your principal place of business, which for most freelancers it is, even if you also work at client sites, as long as you do your administrative work at home.
| Simplified method | Regular method | |
|---|---|---|
| Calculation | $5 x sq ft (max 300) | Business % of home x actual home costs |
| Maximum | $1,500 | No cap (limited to business income) |
| Depreciation | None claimed, none recaptured on sale | Claimed, and recaptured when you sell |
| Recordkeeping | Square footage only | Every utility bill, rent receipt, repair invoice |
| Form | Worksheet in Pub 587 | Form 8829 |
The simplified method is capped at $1,500, which is often less than the truth. If you rent a $2,400-a-month apartment and your office is 15% of the floor area, the regular method gives you 15% of rent ($4,320) plus 15% of utilities and renters insurance. That can easily beat $1,500 by a factor of three. Run both and take the larger. See the IRS home office page for the qualification rules.
4. Mileage and vehicle costs
For 2026 the standard mileage rate comes in two halves. It is 72.5 cents per mile for business miles driven from 1 January to 30 June 2026 (up 2.5 cents on 2025), and the IRS then revised it upward to 76 cents per mile for miles driven on or after 1 July 2026, citing increases in the price of fuel (Announcement 2026-11, modifying Notice 2026-10). Keep the two halves of the year separate in your mileage log. That rate is meant to cover gas, insurance, maintenance, registration and depreciation, so you cannot deduct those separately on top of it. You can still add parking and tolls incurred on business trips.
The alternative is the actual expense method: total up everything the car cost you for the year and deduct the business-use percentage. It usually wins for expensive vehicles and heavy drivers, and it loses on a paid-off Corolla. Two rules constrain your choice: for a car you own, you must use the standard rate in the first year the vehicle is in service if you ever want the option to switch later, and for a leased car, whichever method you pick applies for the entire lease.
Which miles count? Client visits, trips to the bank or the post office for business, driving to a conference, going to a supplier. Commuting does not count, but here is the nuance that pays: if you have a qualifying home office, your home is your workplace, so the drive from home to a client is a business trip rather than a commute. Log the date, the mileage and the business purpose. A contemporaneous log is the single most requested document in a small-business audit.
5. Self-employed health insurance
This one is not a Schedule C expense. It is an adjustment to income, computed on Form 7206, and it can be large. You can deduct 100% of the premiums you paid for medical, dental, vision and qualified long-term care insurance for yourself, your spouse, your dependents and your children under 27.
Three limits to respect:
- The deduction cannot exceed the net profit of the business under which the plan is established. Zero profit means zero deduction.
- You cannot claim it for any month in which you were eligible to participate in a subsidized health plan through an employer, including your spouse's employer. Eligibility disqualifies you even if you declined the coverage. Month by month, not year by year.
- It reduces your income tax only. It does not reduce self-employment tax.
If you buy a Marketplace plan and receive a premium tax credit, only the premiums you actually paid out of pocket are deductible, and the calculation becomes circular. Use the worksheet rather than eyeballing it.
6. Retirement contributions: the biggest lever you have
Nothing else on this list moves as much money. A Solo 401(k) lets you contribute twice: as the "employee" you can defer up to $24,500 of compensation in 2026, and as the "employer" you can add roughly 20% of your net self-employment earnings (net profit minus half your SE tax) on top. Total additions are capped at $72,000, or $80,000 if you are 50 or over and eligible for the $8,000 catch-up.
A SEP IRA is simpler to open (you can even set one up after year end, up to your extended filing deadline) but it has no employee deferral, so it only gets you to about 20% of net earnings. For a freelancer netting $100,000, that is roughly $19,000 with a SEP versus roughly $43,000 with a Solo 401(k). If you have no employees, the Solo 401(k) is almost always the better vehicle.
Like health insurance, these contributions cut income tax but not self-employment tax.
7. Equipment, software and the de minimis safe harbor
Laptops, cameras, monitors, desks, lighting, microphones and tools are deductible when used for business. You have three ways to write them off, and for most freelancers they land in the same place:
- De minimis safe harbor: elect it and you can expense items costing up to $2,500 per item or per invoice immediately, no depreciation schedule at all. This is the cleanest route for the vast majority of freelance purchases (IRS tangible property regulations).
- Section 179: immediate expensing up to $2,560,000 for 2026, limited to your business income, so it cannot create a loss.
- Bonus depreciation: 100% and now permanent, with no dollar cap, and it can create a loss.
Software subscriptions (Adobe, Figma, accounting tools), web hosting, domain names and cloud storage are ordinary deductible expenses in the year paid. Business use percentage still applies: if the family also uses that iPad, only your share is deductible.
8. Phone, internet and the rest of your Schedule C
Cell phones are no longer "listed property," so you do not need minute-by-minute logs, but you do need a reasonable business-use percentage. A defensible approach: review a representative month, work out what share of use was business, apply it consistently and document how you got there. The same applies to home internet. Claiming 100% of a single household internet line is the kind of round number that invites questions.
Other lines that freelancers routinely leave blank:
- Advertising and marketing: ads, your website, business cards, portfolio hosting.
- Professional services: your accountant, your lawyer, bookkeeping.
- Contract labor: subcontractors and virtual assistants. Issue a 1099-NEC if you paid an unincorporated contractor $2,000 or more during 2026.
- Business travel: airfare, lodging and 100% of transport on days that are primarily business. Meals while traveling are 50%.
- Education: courses that maintain or improve skills in your current business. Training that qualifies you for a new profession is not deductible.
- Bank and merchant fees: Stripe, PayPal and business account fees. These add up fast at 2.9% plus 30 cents.
- Business insurance: professional liability, errors and omissions, cyber.
- Interest: on business loans and on the business share of a credit card.
Separately, do not forget the qualified business income (QBI) deduction: up to 20% of your net business income, taken after the standard deduction, with 2026 thresholds of $201,750 single and $403,500 joint before limits start to bite. It is now permanent, and there is a new $400 minimum deduction if you have at least $1,000 of qualified business income.
9. What NOT to deduct
Getting this list wrong is how a routine return becomes an audit.
- Commuting. Home to a coworking space you rent full time is a commute, not a business trip.
- Entertainment. Zero percent since 2018. Concert tickets, golf, ski trips and sports boxes are not deductible even with a signed contract at the end of the round.
- Your own lunch. Eating alone in your home city while working is a personal expense. Meals are deductible when they involve a client or a business contact, or when you are travelling away from home.
- Everyday clothing. A suit for client meetings is not deductible, because it is suitable for ordinary wear. Branded uniforms and genuine protective gear are.
- The full cost of a shared phone or internet line. Business percentage only.
- Health premiums for a month you were eligible for a spouse's subsidized plan.
- Fines and penalties. Parking tickets, speeding fines and IRS penalties are explicitly non-deductible, even if you incurred them on a client run.
- The value of your own time. Unpaid work and pro bono hours are not a deductible expense, because you never took the income.
- Political contributions. Never deductible.
- Charitable donations from a sole proprietorship. These belong on Schedule A, not Schedule C. Sponsorship with genuine advertising value is different, and does belong in advertising.
- A home office used for your W-2 job. The employee home office deduction remains suspended.
10. A worked example: $120,000 of 1099 income in 2026
Maya is a single freelance web developer. She invoices $120,000 in 2026 and files Schedule C.
Schedule C expenses: home office (200 sq ft, simplified) $1,000; mileage 4,000 business miles, all driven in the first half of 2026, at 72.5 cents = $2,900; equipment (laptop, monitor, desk) $4,200; phone and internet business share $1,104; software $2,400; accountant $1,200; professional liability insurance $800; advertising $1,500; business meals ($1,600 spent, 50%) $800. Total: $15,904.
Net profit: $104,096.
Self-employment tax: $104,096 x 92.35% = $96,133, x 15.3% = $14,708 (she is below the $184,500 Social Security cap). Half of that, $7,354, is deductible.
Above-the-line adjustments: half of SE tax $7,354; self-employed health insurance $7,200; Solo 401(k) contribution $30,000. AGI: $59,542.
Subtract the $16,100 standard deduction: $43,442. The QBI deduction is the lesser of 20% of QBI ($11,908) and 20% of taxable income before QBI ($8,688), so $8,688. Taxable income: $34,754.
Federal income tax using the 2026 single brackets: 10% on the first $12,400 = $1,240, plus 12% on the remaining $22,354 = $2,682. Income tax: $3,922. Total federal liability: $3,922 + $14,708 = $18,630.
Now the counterfactual. Had Maya claimed nothing but the mandatory half-of-SE-tax adjustment, her SE tax would have been $16,955 and her income tax $11,506, for a total of $28,461. The deductions above saved her $9,831, an effective 8.2% of gross revenue. That is the entire argument for keeping decent books.
You can reproduce this in about a minute with our 1099 tax calculator, and check the self-employment component on its own with the self-employment tax calculator. One last practical point: freelancers pay as they go. Estimated tax for 2026 is due 15 April, 15 June and 15 September 2026, and 15 January 2027 (IRS Form 1040-ES). Missing them costs you interest-style penalties even if you pay the full balance in April.