Top 20 Tax Deductions Every Freelancer Should Know for 2025 Taxes

For freelancers, 2025 brings important tax changes that could affect how much you keep from your earnings. The standard deduction has been adjusted for inflation, and some key provisions, like the Qualified Business Income deduction, may begin to phase out for higher earners. 

At the same time, a few popular tax credits are set to expire unless Congress extends them. With these shifts, planning ahead could make a real difference. 

In this guide, you’ll find the top 20 tax deductions that freelancers should know for 2025—covering everyday expenses, savings opportunities, and planning strategies to help you stay on track.

1) Home Office Deduction: Simplified vs. Actual Expense Method

If you use part of your home exclusively and regularly for business, you may be eligible for a home office deduction.

Each year, you have two options for calculating it:

✅ Simplified Method

✅ Regular Method

The simplified method could save you time, but the regular method may offer a larger deduction if your home-related costs are higher.

📌 Also Read: How to Claim the Home Office Tax Deduction (Simplified vs Regular Method)

2) Equipment & Office Supplies: When to Expense vs. Capitalize

Under IRS rules, you generally must capitalize major equipment purchases and depreciate them over their useful life, while small-dollar items and routine supplies may be expensed immediately. 

Here’s how to decide:

✅ De Minimis Safe Harbor – Items costing $2,500 or less per invoice (or per item) may be deducted in the year paid if you make the de minimis safe harbor election on your return.

✅ Section 179 Election – For larger qualifying assets placed in service more than 50 percent for business, you may expense up to $1,250,000 of cost in 2025, subject to a phase-out above $3,130,000 of acquisitions.

✅ Bonus Depreciation – Property not taken under Section 179 could be eligible for 100 percent bonus depreciation (check Publication 946 for limits).

✅ Routine Repairs & Supplies – Costs for consumables (pens, paper) and ordinary maintenance generally may be deducted when paid under Reg. 1.162-4.

3) Vehicle & Travel Expenses: Standard Mileage vs. Actual Costs

When you use your vehicle for business, you may choose between two IRS methods for 2025. Both methods require solid recordkeeping under IRS Publication 463 (Travel, Gift, and Car Expenses).

✅ Standard Mileage Rate
For 2025, the IRS sets the business rate at 70 cents per mile driven. To use it, track your work-related miles in a log or app. You multiply those miles by the rate and report the total on Schedule C. You must elect this method in your first year of claiming mileage; thereafter, you may switch annually if you keep detailed records.

✅ Actual Cost Method
Add up all vehicle expenses—fuel, maintenance, insurance, registration, lease payments or depreciation—then multiply by the percentage of business use. You’ll need receipts and clear allocation between personal and work miles. This approach may pay off if your actual costs exceed the standard rate estimate.

4) Health Insurance Premiums: How to Claim 100% of Your Costs

Self-employed individuals may potentially deduct 100 percent of medical, dental, vision, and qualified long-term care insurance premiums paid for themselves, a spouse, and dependents up to age 27. To claim this:

✅ Determine your total premiums. Include amounts you paid during the year, but exclude months when you were eligible for employer-subsidized coverage.

✅ Confirm eligibility. You must report net profit on Schedule C or net earnings as a partner (Schedule K-1), or receive W-2 wages as a more-than-2 percent S corp shareholder; S corp premiums must first appear as wages on Form W-2.

✅ Use Form 7206. Complete Form 7206 to calculate the allowable amount and enter it on Schedule 1 (Form 1040), line 17.

✅ Limit by net income. The deduction may not exceed your net self-employment income from that trade or business.

📝 Important Note: Keep records of all insurance invoices and W-2 statements to support your deduction if audited.

📌 Also Read: What is an HSA? (How It Works, Pros & Cons)

5) Retirement Contributions (SEP-IRA, Solo 401k): Maxing Out Tax-Deferral

✅ SEP-IRA

You, as the “employer,” may contribute up to the lesser of:

✅ Solo 401k

You act as both “employee” and “employer,” so you may contribute:

If you’re age 50 or older, you may add a $7,500 catch-up contribution. And under SECURE 2.0, those aged 60–63 could contribute even more if your plan allows. 

📝 Note: “Compensation” varies by plan type (sole prop vs. S Corp), so check IRS definitions before calculating your maximum.

6) Self-Employment Tax Deduction: Claiming the “Employer” Half

Under most circumstances, self-employed individuals may deduct one-half of their self-employment tax as an adjustment to income, which generally lowers adjusted gross income without affecting net earnings or the tax itself. 

To claim this employer-half deduction:

✅ Calculate total self-employment tax on Schedule SE (Form 1040)
✅ Transfer one-half of that amount to Schedule 1 (Form 1040), Line 15
✅ File both Schedule SE and Schedule 1 with the Form 1040 return

This deduction applies whether or not itemizing and typically reduces federal income tax liability for sole proprietors and independent contractors.

7) Qualified Business Income (QBI) Deduction

The Qualified Business Income (QBI) deduction may allow eligible freelancers to deduct up to 20 percent of their net business income from sole proprietorships, partnerships, or S corporations. 

For 2025, this deduction typically begins to phase out when taxable income is above $197,300 for single filers or $394,600 for joint filers. It fully phases out at $247,300 and $494,600, depending on your filing status. Your final deduction amount could also depend on W-2 wages paid by your business and the value of certain tangible property you own.

✅ Calculate QBI using your Schedule C or K-1

✅ Check if your taxable income falls within the 2025 phaseout thresholds

✅ Apply any wage or property limits before claiming it on Form 1040, Schedule 1, Line 13a

8) Software, Apps & Online Subscriptions: Don’t Overlook Micro-Fees

Freelancers often rely on digital tools to manage their work, and the costs could add up faster than expected. The IRS generally allows deductions for software, apps, and subscription services that are ordinary and necessary for your business, as stated in IRS Publication 535.

✅ Common Deductible Items:

📝 Quick Tip: Always keep detailed records of your purchases. If software is used for both personal and business purposes, only the business-use portion may be deductible.

9) Phone & Internet: Allocating Business Use Percentage

Freelancers often depend on phone and internet services to run their businesses. According to IRS Publication 535, these costs are generally tax-deductible.

However, you can only deduct the portion used specifically for business. Any personal use must be excluded, so it’s important to accurately determine the percentage related to your work.

How to Determine Business Use

✅Track the number of business vs. personal calls over a representative period.

✅Estimate the percentage of time spent on business activities if internet use is shared.

✅Apply that percentage to your total phone and internet bills.

📝 Hypothetical Example: If 60 percent of your internet usage goes toward client work and business-related communications, you can claim 60 percent of your internet bill as a deductible business expense. 

📝 Reminder: The IRS recommends maintaining clear records, such as monthly statements and usage logs, to support your deduction if questioned.

10) Education & Training: Deductible Courses, Certifications & Conferences

Investing in education may help freelancers stay competitive. In many cases, the costs could be tax-deductible. According to IRS guidelines, expenses for education must maintain or improve skills needed for your current trade or business to qualify as a deduction.

✅ What may be deductible:

❌ What is typically not deductible:

📝 Quick note: Travel costs associated with attending qualified conferences may also be deductible, but they must meet specific IRS guidelines regarding business purpose and necessity.

11) Advertising & Marketing: From Business Cards to Social Media Ads

Advertising and marketing expenses are generally deductible if they’re ordinary, necessary, and directly related to your freelance trade or business. According to IRS guidance, costs you could write off include:

✅ Business cards, brochures, and branded swag
✅ Website design, hosting, and domain fees
✅ Paid social media ads (e.g., Facebook boosts, LinkedIn campaigns)
✅ Print, online, and local sponsorships (event booths, program ads)

📝 Note: Keep receipts, contracts or invoices showing the date, vendor and purpose of each expense. If an expense has both personal and business use (e.g., a combined personal-business flyer), apportion the deductible amount based on actual business use.

📌 For more on recordkeeping and other common deductions, see IRS Publication 334 – Tax Guide for Small Business.

12) Professional Services: Legal, Accounting, & Consulting Fees

Fees paid to outside specialists may be fully deductible if the services are ordinary and necessary for your freelance business. Examples include:

✅ Attorney fees for contract drafting or review
✅ Accountant fees for tax preparation, payroll, or bookkeeping
✅ Consultant fees for business setup, strategy, or coaching

📝 Note: Under the cash-method of accounting, you generally deduct these expenses in the year you pay them. Make sure to keep detailed invoices, engagement letters, and proof of payment in your records. These documents help substantiate that the services were directly related to your trade or business and support your deduction if you’re ever audited.

13) Insurance Premiums: Liability, Errors & Omissions, Business Property

Freelancers often carry some form of business insurance, and premiums for ordinary and necessary coverage are generally deductible in the year they apply. 

Common policies include:

✅ General liability insurance – Covers third-party injuries, property damage, or advertising claims
✅ Professional liability (Errors & Omissions) insurance – Protects against claims of negligence or faulty advice
✅ Commercial property insurance – Reimburses loss or damage to business equipment and workspace
✅ Business owner’s policy (BOP) – Bundles liability, property, and business interruption coverage

Report these premiums on Schedule C (Line 15) of your Form 1040. If premiums cover multiple years, deduct only the portion applicable to the current tax year. Premiums for personal policies, such as life insurance where you are the beneficiary, are not deductible.

14) Bank Fees & Merchant Processing Charges: Every Stripe & PayPal Fee

Bank fees and merchant processing charges are typically considered ordinary and necessary business expenses under IRS rules (IRC §162). Tracking these small costs can help reduce your taxable income over time. Common examples include:

✅ Monthly service fees for business checking accounts
✅ Transaction fees for deposits, withdrawals, and transfers
✅ Merchant processing fees from Stripe, PayPal, or Square
✅ Overdraft and insufficient funds fees tied to business activity
✅ Wire transfer and ACH transfer fees

📝 Reminder: Your Form 1099-K from processors like PayPal may show total transactions but won’t separate out fees. It’s a good idea to keep copies of your monthly statements to track these charges accurately.

15) Meals & Entertainment: Updated 50% vs. 100% Deductibility Rules

As of 2025, the IRS generally allows a 50% deduction for business-related meal expenses. This includes meals consumed while traveling for business or during meetings with clients, provided that:

✅ The taxpayer (or an employee) is present during the meal.

✅ The meal is not considered lavish or extravagant under the circumstances.

Entertainment expenses, such as tickets to sporting events or concerts, are not deductible, even if business discussions occur during these events. However, if food and beverages are purchased separately from the entertainment and their costs are stated separately on receipts or invoices, the meal portion may still qualify for the 50% deduction.

16) Claiming Deductions for Depreciation and Section 179 Expenses

If you purchase equipment like computers, cameras, or office furniture for your freelance work, you may recover the cost through depreciation or Section 179 deduction. This could let you deduct the full cost of qualifying purchases in the year you place the item in service. For 2025, the limit is $1,250,000, with a phase-out starting at $3,130,000.

✅ What to keep in mind:

📝 Tip: Keep records like purchase receipts and service dates handy. You’ll need them when filing IRS Form 4562 to claim these deductions.

17) Home Utility Bills: Apportioning Electricity, Rent & Property Taxes

Expenses for utilities, rent and property taxes may be deductible to the extent you use part of your home for business. The IRS advises figuring your business percentage by dividing the square footage of your home office by your home’s total square footage. Then:

✅ Multiply your total utility bills (electricity, gas, trash removal, cleaning) by that percentage
✅ Apply the same percentage to your rent (if you rent) or property taxes (if you own)

Report these indirect expenses on Form 8829 (Schedule C) or use the simplified method worksheet if you prefer the $5-per-square-foot option. Keep detailed records of all bills and your home-office measurements to substantiate the deduction if audited.

18) State & Local Tax (SALT) Planning: Capping vs. Deducting Pass-Through Entity Taxes

Freelancers in high-tax states may face a $10,000 cap on state and local tax (SALT) deductions. However, many jurisdictions now offer a pass-through entity tax (PTET) election. Under IRS Notice 2020-75, partnerships and S corporations that elect PTET treat those payments as “Specified Income Tax Payments,” allowing a deduction at the entity level rather than on Schedule A. 

To determine if PTET makes sense for you:

✅ Check if your state offers a PTET option
✅ Compare the value of entity-level deductions against the individual SALT cap
✅ Review your state’s specific forms, deadlines, and eligibility rules

Since every state’s PTET rules differ and guidance could evolve, consulting a tax professional might help you optimize deductions and stay compliant.

19) Estimated Tax Payments: Avoiding Underpayment Penalties

Freelancers typically owe tax as they earn income rather than waiting for April 15. Making estimated tax payments may help you meet the IRS “pay-as-you-go” requirements under IRC 6654 and avoid underpayment penalties. You generally satisfy the safe-harbor if you’ve paid at least:

✅ 90 percent of your current year’s tax liability, or
✅ 100 percent of last year’s tax (110 percent if your prior-year adjusted gross income exceeded $150 000).

📝 Tip: Keep your quarterly vouchers, calculation worksheets, and proof of payment on file to avoid surprises and potential penalties when you file.

20) Recordkeeping & Audit-Readiness: Best Practices for Receipts & Logs

Think of organized records as your safety net if the IRS ever comes knocking. IRS Publication 583 explains how self-employed individuals should keep receipts, logs and supporting documents.

To stay prepared year-round:

✅ Maintain a simple system (digital or paper) that separates business and personal expenses
✅ Note dates, amounts and the business purpose for all mileage and travel
✅ File receipts by category (supplies, meals, advertising) within 60 days of each transaction
✅ Retain records for at least three to seven years, depending on the expense or asset type
✅ Review your files annually to remove outdated items and confirm audit-readiness

A little effort on consistent recordkeeping throughout the year may ease stress and help substantiate your deductions if documentation is requested.

Key Takeaways for Your 2025 Taxes

Start organizing your deductible expenses today to stay ahead of potential savings opportunities. Consider scheduling quarterly estimated payments and reviewing retirement contribution options early in the year to reduce stress during tax season. 

If your situation involves complex rules, consulting a qualified tax professional may help avoid costly mistakes. For more details, refer to IRS Publication 587 and the Schedule C instructions, which offer additional guidance for self-employed individuals.

📌 Also Read:

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