Every legitimate business deduction reduces your net profit — and thus both your self-employment tax (15.3%) and your income tax. A $10,000 deduction at a 30% combined rate saves $3,000 in taxes.
1. Half of Self-Employment Tax
The IRS lets you deduct 50% of your SE tax from gross income before calculating income tax. If your SE tax is $12,240, you deduct $6,120. This is automatic — you don't need receipts.
2. Home Office Deduction
Simplified method: $5 per square foot of dedicated office space (max $1,500) Actual expense method: prorate home expenses (mortgage/rent, utilities, insurance) by percentage of home used exclusively for business.
The office must be used regularly and exclusively for business — a desk in a shared living room doesn't qualify.
3. Health Insurance Premiums
If you pay for your own health insurance (not through a spouse's employer plan), 100% of premiums are deductible from gross income (not just as an itemized deduction). This includes dental and vision insurance.
4. Retirement Contributions
- SEP-IRA: up to 25% of net earnings from self-employment, max $69,000 (2024)
- Solo 401(k): $23,000 employee contribution + 25% employer contribution
- Roth IRA: $7,000 contribution — not deductible, but tax-free growth
SEP-IRA and Solo 401(k) are the highest-impact deductions available to freelancers. At $100k net profit, a maxed SEP-IRA saves ~$7,000–$10,000 in taxes.
5. Business Equipment and Software
Computers, cameras, microphones, software subscriptions, cloud services, co-working space, professional books and courses — all deductible if used for business. Section 179 lets you deduct the full cost in year one rather than depreciating over time.
6. Professional Services
Accounting and bookkeeping fees, legal fees for business matters, and professional liability insurance premiums are all fully deductible.
Estimate your tax liability after deductions at the Freelance Tax Estimator.