Every deduction you're missing

The standard test for any deduction

Before we list deductions, the rule the IRS uses to decide if anything is deductible: it must be "ordinary and necessary" for your trade or business. Ordinary means common in your industry. Necessary means helpful and appropriate (not "indispensable", the bar is lower than people think).

A graphic designer deducting Adobe Creative Cloud: ordinary (everyone uses it) and necessary (you literally can't do the work without it). Easy yes. A graphic designer deducting a $200 ergonomic chair: ordinary (everyone has a chair) and necessary (you sit in it to work). Easy yes.

A graphic designer deducting a $4,000 espresso machine because "I drink coffee while I work": no. The personal use is too dominant. The test isn't whether you can argue some business benefit. It's whether the expense is genuinely incurred for your business.

Home office: the most-skipped deduction

If you regularly and exclusively use part of your home for business, you can deduct a portion of your rent (or mortgage interest), utilities, internet, and home insurance. Most freelancers qualify and don't claim it.

Two methods. Simplified: $5/sqft, max 300 sqft, max $1,500. Easy, no documentation beyond the square footage. Actual: measure your office's percentage of total home square footage, multiply that percentage by your annual home costs. More work, often a bigger deduction.

Real example: a freelancer paying $2,400/month rent uses a 150 sqft room (~12% of a 1,250 sqft apartment) exclusively for work. Annual rent: $28,800. Deduction under actual method: $28,800 × 12% = $3,456. Add $400 for utilities and $720 for internet pro-rated: deduction is ~$4,576. At a 25% combined tax rate, that's ~$1,144 saved.

Mileage: the second-most-skipped

For 2026, the IRS standard mileage rate is $0.725/mile. Every business mile you drive is a $0.725 deduction. Most freelancers undercount their business miles by 50% or more because they only remember the obvious trips.

What counts: client meetings, networking events, supply runs, post office trips, business meals (the drive to and from), visits to your CPA, banking trips. Does not count: commuting from home to a regular office (unless your home is your principal place of business, see Home Office).

Real example: a freelance consultant drives 8,500 business miles in a year. Deduction: 8,500 × $0.725 = $6,162.50. At a 25% combined rate, ~$1,540 saved. The catch: you must keep a contemporary log (a mileage app like MileIQ counts; reconstructing it from memory in March does not).

Phone, internet, and home utilities

If you use your personal cell phone for business, you can deduct the business-use percentage. The IRS doesn't require precise measurement, but a reasonable allocation (say, 60% business / 40% personal for a freelancer) is fine if you can justify it.

Same for internet: the percentage of your home internet you use for work. If you work from home full-time, 80–90% is reasonable.

Real example: $90/month phone bill × 60% business = $54/month deductible = $648/year. $80/month internet × 80% business = $64/month deductible = $768/year. Combined: ~$1,400 in deductions, ~$350 saved at a 25% rate. People skip this because the numbers seem small per-month, but compound across the year, it adds up.

Health insurance: the big one most freelancers miss

If you're self-employed, you can deduct 100% of the premiums you pay for health insurance for yourself, your spouse, and your dependents, up to the amount of your business's net profit. This is an above-the-line deduction (it reduces your AGI), which is much more valuable than an itemized deduction.

The catch: you can't take this deduction if you (or your spouse) were eligible for an employer-subsidized health plan during any month of the year. The deduction is month-by-month, so if you went solo in June, you can deduct premiums for June–December.

Real example: a freelancer pays $750/month for health insurance for themselves and their spouse. Annual premiums: $9,000. At a 22% federal + 7.65% Medicare/Social Security saving (since this also reduces SE tax base in some cases) = ~$2,670 saved. This single deduction is often the largest one a freelancer takes.

Retirement: pay yourself first, save tax twice

Self-employed people have access to retirement accounts with much higher contribution limits than employees. Two main options.

Solo 401(k): contribute up to $23,500 as the "employee" plus 25% of net SE income as the "employer," for a combined max of $70,000 in 2026. Best for high earners.

SEP-IRA: contribute up to 25% of net SE income, max $70,000 in 2026. Easier setup than a Solo 401(k), no annual filings required (until balance exceeds $250,000).

Real example: a freelancer with $100,000 net profit contributes $25,000 to a SEP-IRA. Tax savings: $25,000 × ~30% effective rate = $7,500 in current-year tax savings. The money grows tax-deferred. This is the highest-leverage move a self-employed earner can make, bigger than any individual expense deduction.