Top Tax Deductions for Self-Employed Individuals

Updated October 2026 with tax year 2026 figures.

Being self-employed comes with unique tax challenges, but it also opens the door to valuable deductions that may reduce your tax liability. Here are some of the most important deductions you shouldn’t miss.

Home Office Deduction

If you use part of your home exclusively and regularly for business, you can deduct related expenses. You have two options:

Simplified Method

Deduct $5 per square foot of home office space, up to 300 square feet (maximum $1,500 deduction).

Regular Method

Calculate the actual percentage of your home used for business and deduct that percentage of:

Mortgage interest or rent
Property taxes
Utilities
Insurance
Repairs and maintenance

Vehicle Expenses

For business use of your vehicle, you can choose between:

Standard Mileage Rate

For 2026 there are two business rates, the first midyear change since 2022: 72.5 cents per mile for January 1 through June 30 (Notice 2026-10) and 76 cents per mile for July 1 through December 31 (Announcement 2026-11). The 2025 rate was 70 cents. Because the rate depends on when you drove, your mileage log needs dates, not just a year-end total.

Actual Expenses

Track actual costs like gas, insurance, repairs, and depreciation, then deduct the business-use percentage.

Health Insurance Premiums

Self-employed individuals can deduct health insurance premiums for themselves, their spouse, their dependents, and children under age 27 (IRC 162(l)). This is an “above-the-line” deduction, meaning you can take it even if you don’t itemize.

Two limits apply:

Earned income limit. The deduction can’t exceed your earned income from the business: net self-employment earnings, minus the deductible half of self-employment tax and any self-employed retirement contributions.
Employer plan limit. No deduction is allowed for any month you were eligible to participate in a subsidized health plan through your own employer or your spouse’s employer, even if you didn’t enroll.

Retirement Contributions

Contributions to a SEP-IRA, Solo 401(k), or SIMPLE IRA are deductible and help you save for retirement while reducing your current tax bill.

Business Supplies and Equipment

Deduct the cost of:

Office supplies
Software and subscriptions
Equipment purchases (or depreciate over time)
Section 179 allows an immediate deduction of up to $2,560,000 of qualifying equipment placed in service in 2026, phasing out dollar for dollar once the cost of Section 179 property placed in service during the year exceeds $4,090,000 (IRC 179(b), as amended by the One Big Beautiful Bill Act). The deduction is also limited to your taxable income from active trades or businesses; any excess carries forward. SUVs over 6,000 pounds are limited to $32,000 under Section 179.

100% Bonus Depreciation

Bonus depreciation is back at 100% and is now permanent for qualifying property acquired after January 19, 2025 (IRC 168(k), as amended by the One Big Beautiful Bill Act). Unlike Section 179, it has no dollar cap and no taxable income limit, so it can create or increase a loss. It also applies automatically unless you elect out by asset class.

For most sole proprietors buying a computer, a piece of equipment, or a work vehicle, Section 179 and bonus depreciation reach the same answer: the full cost is deducted in the year the asset is placed in service. Which one we use depends on your state (Indiana and Kentucky both have their own conformity rules), whether you want the deduction to create a loss, and how the asset will be used in later years.

Professional Services

Fees paid to accountants, lawyers, consultants, and other professionals are fully deductible business expenses.

Marketing and Advertising

All costs related to promoting your business are deductible:

Website hosting and development
Social media advertising
Business cards and promotional materials
Sponsorships

Internet and Phone

If you use your phone and internet for business, you can deduct the business-use percentage of these expenses.

Education and Training

Courses, workshops, conferences, and professional development directly related to your current business are deductible.

The Qualified Business Income (QBI) Deduction

Section 199A lets most self-employed people deduct up to 20% of their qualified business income, on top of every expense above. It is not a Schedule C expense; it comes off after adjusted gross income, and you get it whether or not you itemize. The One Big Beautiful Bill Act made it permanent.

Two things to know for 2026:

The deduction is limited to 20% of your taxable income (before the QBI deduction and net of capital gains), so a low-income year can shrink it. For 2026, the limitation for specified service businesses (health, law, accounting, consulting, and similar fields) begins at $201,750 of taxable income for single and head of household filers, $403,500 for joint filers, and $201,775 for married filing separately (Rev. Proc. 2025-32), and it phases in over the next $75,000 (single) or $150,000 (joint) (IRC 199A(b)(3) and (d)(3), as amended).
New for 2026, there is a $400 minimum. If you have at least $1,000 of QBI from a trade or business in which you materially participate (IRC 469(h)), your deduction is the greater of the computed amount or $400 (IRC 199A(i)). Both figures are indexed for inflation after 2026. This mostly helps very small side businesses whose 20% computation comes out below $400.

Your QBI is reduced by the deductible half of self-employment tax, self-employed health insurance, and retirement contributions tied to the business, so those deductions interact with this one. We run the calculation both ways when we prepare your return.

Don’t Forget Quarterly Estimates!

Remember, if you’re self-employed, you likely need to make quarterly estimated tax payments. We can help you calculate these to avoid penalties.