A self-employed person can overpay taxes by overlooking allowable deductions. An unrecorded business expense can raise taxable profit and the resulting tax bill.

Here are deductions that freelancers and sole proprietors commonly miss. As always, an expense must be ordinary and necessary for your business to qualify, and you should keep records to support it.

1. The Home Office Deduction

If you use part of your home regularly and exclusively for business, you may be able to deduct a portion of your rent, utilities, and insurance. You can use the simplified method ($5 per square foot, up to 300 square feet) or the actual-expense method on Form 8829.

This is a legitimate deduction when you meet the qualification rules and keep supporting records. See our full guide to the self-employed home office deduction.

2. The Deductible Part of Your Self-Employment Tax

When you pay self-employment tax, you can generally deduct the deductible part as an adjustment to income on Schedule 1, not Schedule C. For many filers, this is one-half of self-employment tax. It offsets part of the cost of paying both the employer and employee portions of Social Security and Medicare taxes.

3. Self-Employed Health Insurance

If you are self-employed, you may be able to deduct premiums for medical, dental, vision, and qualifying long-term care insurance for yourself, your spouse, and dependents. The deduction is generally claimed as an adjustment to income, subject to limits, rather than on Schedule C. Among other restrictions, do not include amounts for any month you were eligible to participate in a subsidized health plan maintained by your employer or your spouse’s employer. Review Form 7206 and its instructions for your facts.

4. Retirement Contributions

Contributions to a SEP, SIMPLE IRA, or one-participant 401(k) can provide a tax-advantaged way to save for retirement. A sole proprietor generally deducts contributions for themselves outside Schedule C, while contributions for employees generally go on Schedule C. Limits and calculation rules depend on the plan, so review the IRS guidance before contributing.

5. The Qualified Business Income (QBI) Deduction

Many self-employed people qualify to deduct up to 20% of qualified business income, subject to limits and rules. The deduction is permanent under current federal law, but QBI does not always equal your Schedule C profit. Your taxable income, type of business, and other factors can affect the calculation.

6. Software, Subscriptions, and Tools

Ordinary and necessary business-use costs for apps and services can be deductible: design and productivity software, cloud storage, accounting and invoicing tools, website hosting, and professional subscriptions. Allocate mixed personal and business use, and review whether a longer-lived cost must be capitalized or depreciated rather than deducted immediately.

7. Bank and Payment-Processing Fees

Ordinary and necessary merchant processing fees, business bank account fees, and similar charges can be deductible business expenses. They are easy to overlook when they are deducted automatically before the money reaches you, so reconcile your gross receipts and fees rather than recording only the net deposit.

8. Business Use of Your Phone and Internet

You can deduct the business-use portion of your cell phone and home internet. You cannot deduct 100% if you also use them personally — you must reasonably allocate the business share. (Note: the cost of the first landline to your home is not deductible even if you use it for business.)

9. Continuing Education and Professional Development

Courses, certifications, books, and training that maintain or improve skills for your current business can be deductible. Education generally does not qualify if it is needed to meet the minimum requirements of your current trade or business or if it qualifies you for a new trade or business.

10. Business Mileage

If you drive for business, you may be able to deduct allowable vehicle costs. You can generally use the standard mileage rate or actual expenses, but the eligibility rules and records matter. See Standard Mileage vs. Actual Expenses.

The Real Reason Deductions Get Missed

Many easy-to-miss Schedule C deductions come down to a transaction that was not recorded or categorized. Other deductions in this list, such as the deductible part of self-employment tax, self-employed health insurance, retirement contributions, and QBI, are generally claimed outside Schedule C and require separate review.

Clean books make the Schedule C portion easier to prepare and review. Simple-C helps organize your business transactions by Schedule C category throughout the year, so your tax-ready breakdown is based on recorded income and expenses rather than memory.

For the complete, line-by-line picture, read Schedule C Expense Categories: The Complete List.

This article provides general information, not tax advice. Eligibility, limits, and rules for each deduction depend on your situation and can change. Confirm what applies to you with the IRS or a qualified tax professional.

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