If you work for yourself, there's a good chance you're paying tax on money you already spent on your business. This guide walks through 10 tax deductions that apply to self-employed people and business owners: how each one works, a simple example with 2026 numbers, how to qualify, and the most common mistakes.
A few of these work differently if your business is taxed as an S corp. When that happens, you'll see an S corp note.
How a tax deduction works
A deduction doesn't cut your tax bill dollar for dollar. It lowers the income you get taxed on. So if you made $100,000 and you have $20,000 in deductions, you're taxed on $80,000.
How much a deduction saves depends on your tax rate. At a 22% federal rate, a $1,000 deduction saves about $220 in federal income tax. Business expenses can also lower self-employment tax, which is 15.3% on most of your profit.
The 10 deductions at a glance
| Deduction | 2026 example |
|---|---|
| 1. Home office | 200 sq ft × $5 = $1,000 (simplified method, max $1,500) |
| 2. Car and mileage | 5,000 miles × 72.5¢ = $3,625 |
| 3. Phone, internet, software | $100/month phone, 60% business = $720/year |
| 4. Business meals | $80 client lunch = $40 deduction (50%) |
| 5. Education and training | $600 course for your current line of work |
| 6. Health insurance | $500/month premium = $6,000/year |
| 7. Hiring your kids | $8,000 in wages moved to your child's lower bracket |
| 8. QBI deduction | $80,000 of qualified income = up to $16,000 |
| 9. Equipment | $3,000 laptop and camera deducted in the year bought |
| 10. Retirement contributions | Solo 401(k): up to $72,000 total in 2026 |
1. Home office deduction
If part of your home is used for your business, you may be able to deduct it. The simplified method is $5 per square foot, up to 300 square feet. So a 200-square-foot office is a $1,000 deduction, and the most you can deduct this way is $1,500.
How to qualify
- The space is used regularly and only for work. This is called the exclusive use test.
- It's the main place you run the business, even if that just means it's where you do billing, scheduling, and admin. A place where you meet clients can also count.
- A separate structure used only for business, like a detached studio, can qualify too.
Limits
- The simplified method tops out at $1,500 (300 square feet).
- The regular method, which uses a share of your actual home costs, can't be more than your business profit. The extra carries forward to future years.
- W-2 employees working from home for an employer can't take this deduction.
S corp note: owners generally can't use Form 8829. The usual route is for the business to reimburse the owner through an accountable plan.
Common mistake: a desk in the guest room or the kitchen table usually doesn't count. The space has to be used only for work.
2. Car and mileage deduction
Business driving can be deducted using the IRS standard mileage rate or your actual costs. For 2026, the rate is 72.5 cents a mile for the first half of the year and 76 cents a mile from July 1. So 5,000 business miles at 72.5 cents is a $3,625 deduction. The other option is deducting actual costs, like gas, repairs, insurance, and depreciation.
What counts
- Driving to clients, between work locations, to pick up supplies, or to temporary job sites.
- When your home office is your main place of business, trips from home to other work locations can count.
- Parking and tolls on business trips are deductible on top of the mileage rate.
What doesn't
- Commuting to a regular office or workplace never counts.
- To use the mileage rate on a car you own, it has to be chosen in the car's first year of business use. A leased car using the mileage rate has to stay on it for the whole lease.
S corp note: a personal car is usually reimbursed by the business through an accountable plan, or the business owns the car.
Common mistake: no mileage log. The IRS expects a record made at the time with the date, the miles, and why you drove. Plenty of apps track this for you. Rebuilding a year of trips from memory at tax time is weak proof.
3. Phone, internet, and software
If you use your phone and internet for both business and personal reasons, you can deduct the business share. Say your phone bill is $100 a month and 60% of your use is for work. That's about $720 a year. Software and tools you only use for work, like design apps or scheduling tools, are generally fully deductible.
- The expense has to be ordinary and necessary for your type of business: common and helpful, not lavish.
- An easy way to set your business-use percentage is to track one normal month and use that.
- Keep the bill or receipt, and pay from a business account when you can.
S corp note: personal phone and internet are usually reimbursed through an accountable plan. Software the business pays for is deducted by the business.
Common mistake: deducting 100% of a phone you also use to text friends. And personal streaming subscriptions don't count just because you watched one thing for research.
4. Business meals
Meals with clients, customers, or other business contacts are usually 50% deductible. So an $80 lunch with a client is a $40 deduction. Meals while traveling overnight for business are also 50% deductible.
How to make it count
Write down five things: how much, when, where, who was there, and what business you talked about. A note on the back of the receipt works.
What changed
- Entertainment, like concert tickets, golf, or a game, isn't deductible.
- Starting in 2026, snacks and meals your business provides at the office for employees' convenience are generally not deductible either.
- A company-wide event, like a holiday party for your whole team, can still be fully deductible.
Common mistake: deducting entertainment, or solo meals while working near home.
5. Education and training
Courses, books, coaching, and conferences can be deductible when they keep up or improve the skills you use in your business right now. A $600 marketing course for a marketing business can count. Keep the receipt and a quick note on how it connects to your work.
- Training required by law or a license for your current work counts too.
- Courses taken before the business started may count as startup costs instead, with up to $5,000 deductible in the first year (this phases out at higher startup costs).
- Travel to a conference counts only when the trip is mainly for business.
Common mistake: deducting training for a brand-new career. A photographer taking a coding bootcamp is generally a personal expense, not a business one.
6. Self-employed health insurance deduction
If you're self-employed, you can generally deduct what you pay for health, dental, and long-term care insurance for yourself, your spouse, and your kids (including children under 27). So a $500 monthly premium is a $6,000 deduction for the year.
- Your business needs a net profit for the year, and the deduction can't be more than that profit.
- It isn't allowed for any month you or your spouse could have joined an employer's subsidized health plan, even if you didn't sign up.
- It lowers income tax, but not self-employment tax.
- Marketplace premium tax credits change the math, so a tax professional can help sort out how the two interact.
S corp note: for owners with more than 2% of the company, the S corp pays or reimburses the premiums and adds them to the owner's W-2 wages. The owner then takes the deduction personally.
Common mistake: claiming months when an employer plan was available through a spouse's job.
7. Hiring your kids
This is the one almost nobody uses. If your kids do real work for your business, like filing, cleaning, or helping with social media, you can pay them a wage, and your business deducts it. Your child might owe little or no income tax on it because of their own standard deduction.
Say you pay your teenager $8,000 for real work. Your business deducts $8,000, and that money moves from your tax bracket to theirs. If you're a sole proprietor and your child is under 18, those wages are generally also exempt from Social Security and Medicare taxes.
How to qualify
- The work is real and the business needs it.
- The pay is reasonable, about what you'd pay someone else for the same job.
- Keep timesheets and a written job description, and run it through payroll with a W-2.
S corp note: the wages are still deductible, but the payroll tax exemption doesn't apply. The exemption is only for children under 18 working for a sole proprietorship or a partnership owned only by their parents.
Common mistake: no records. Without timesheets and real pay, it looks like a gift. And no, a four-year-old is not your social media manager.
8. Qualified business income (QBI) deduction
Many business owners can deduct up to 20% of their qualified business income, and they don't have to spend anything to get it. When Congress cut taxes for big corporations in 2017, most small businesses didn't benefit, because they don't pay corporate tax. This deduction was added to even things out, and in 2025 it was made permanent. So $80,000 of qualified business income could mean up to a $16,000 deduction.
- It works for sole proprietors, partnerships, LLCs, and S corps, but not C corps.
- Above certain income limits, specified service businesses (like consulting, law, health, and finance) see it shrink or disappear, and wage and property limits can also reduce it.
- An S corp owner's salary isn't qualified business income. Only the profit is.
- The total deduction is capped at 20% of taxable income, minus capital gains.
Common mistake: assuming it always applies at higher incomes.
9. Equipment (Section 179 and bonus depreciation)
Computers, cameras, furniture, and some vehicles can often be fully deducted in the year you buy them, instead of spread out over several years. For 2026, the Section 179 limit is $2,560,000, and 100% bonus depreciation is back for property acquired after January 19, 2025.
- The equipment has to be set up and in use by the end of the year, not just ordered.
- It has to be used more than half the time for business.
- Heavy SUVs have a lower Section 179 cap of $32,000 in 2026.
- If business use later drops to 50% or less, part of the deduction can be taken back. Some states don't follow the federal rules.
Common mistake: buying something just for the write-off. If your combined tax rate is about 30% and you spend $3,000 on a camera, you save about $900 in taxes. You're still out $2,100. A deduction is a discount, not free money.
10. Retirement contributions
This is usually the biggest one. With a Solo 401(k), you can put in up to $24,500 as the employee, plus an employer contribution, up to $72,000 total in 2026 if you're under 50. People 50 and older can add $8,000 more, and people ages 60 to 63 can add $11,250. Every pre-tax dollar lowers your taxable income.
- A Solo 401(k) needs self-employment income and no full-time employees other than you and your spouse.
- If you have employees, a SEP IRA is another option, but it has to cover eligible employees at the same percentage you give yourself.
- The $24,500 employee limit is shared with any 401(k) at a day job.
- S corp note: the employer part is based on the owner's W-2 salary, not distributions.
Common mistake: waiting until tax season. Some deadlines hit on December 31, so waiting can mean missing the chance for last year.
For the full breakdown, read What Is a Solo 401(k)?
Recap
Those are 10 deductions: your home office, mileage, phone and software, meals, education, health insurance, hiring your kids, QBI, equipment, and retirement. Deductions lower your tax bill, but they don't make it go away. A lot of self-employed people still get caught off guard in April because the money for taxes was never set aside.