The Complete Guide to Self-Employed Tax Deductions
From home office to mileage to health insurance — every deduction available to self-employed taxpayers in 2025.
This article is provided for general informational purposes by Eugene Solutions LLC. For personalized tax advice specific to your situation, please schedule a consultation with one of our licensed tax professionals.
In This Article
- 1. Self-Employment Tax: Understanding Your Obligation
- 2. The Home Office Deduction (Form 8829)
- 3. Vehicle and Mileage Deductions
- 4. Health Insurance Premium Deduction
- 5. Retirement Contributions: SEP-IRA and Solo 401(k)
- 6. Business Expenses: What's Deductible (and What's Not)
- 7. Quarterly Estimated Tax Payments
Self-Employment Tax: Understanding Your Obligation
When you're self-employed, you're responsible for both the employee and employer portions of Social Security and Medicare taxes — a combined rate of 15.3% on net self-employment income (12.4% for Social Security on the first $168,600 of income in 2025, plus 2.9% for Medicare on all income). This is reported on Schedule SE and is in addition to your regular income tax. The good news? You can deduct the employer-equivalent portion (7.65%) as an adjustment to income on your 1040. Eugene Solutions calculates this automatically for every self-employed client.
The Home Office Deduction (Form 8829)
If you use a dedicated space in your home exclusively and regularly for business, you can deduct a portion of your home expenses. There are two methods: The Simplified Method allows a deduction of $5 per square foot of your home office, up to 300 square feet (maximum $1,500). The Regular Method calculates the actual percentage of your home used for business and applies it to mortgage interest or rent, utilities, insurance, repairs, and depreciation. For example, if your office is 200 sq ft of a 2,000 sq ft home, you can deduct 10% of qualifying expenses. Eugene Solutions helps you determine which method yields the larger deduction.
Vehicle and Mileage Deductions
If you use your personal vehicle for business, you have two options: the Standard Mileage Rate (67 cents per mile for 2025) or Actual Expenses (gas, insurance, maintenance, depreciation, parking, tolls). You must keep a contemporaneous mileage log — the IRS requires documentation of date, destination, business purpose, and miles driven. Apps like MileIQ can help track automatically. Commuting miles (home to your regular office) are never deductible, but driving from your home office to a client site is. Eugene Solutions reviews your mileage log and recommends the method that gives you the biggest deduction.
Health Insurance Premium Deduction
Self-employed individuals can deduct 100% of health insurance premiums paid for themselves, their spouse, and dependents — including dental and long-term care premiums. This is an "above-the-line" deduction (claimed on Schedule 1, Line 17), meaning you get it even if you don't itemize. The deduction cannot exceed your net self-employment income, and you cannot claim it for any month you were eligible for an employer-sponsored plan (including through a spouse's employer). This deduction alone can save self-employed taxpayers thousands of dollars annually.
Retirement Contributions: SEP-IRA and Solo 401(k)
Self-employed individuals have access to powerful retirement savings vehicles. A SEP-IRA allows contributions of up to 25% of net self-employment income (after the SE tax deduction), with a maximum of $69,000 for 2025. A Solo 401(k) allows employee deferrals of up to $23,500 ($31,000 if age 50+) plus employer contributions of up to 25% of net income. These contributions reduce your taxable income dollar-for-dollar. Example: A self-employed consultant earning $150,000 net could contribute up to $37,500 to a SEP-IRA, reducing their taxable income to $112,500 — a potential tax savings of $8,250 or more at the 22% bracket.
Business Expenses: What's Deductible (and What's Not)
Common deductible business expenses include: office supplies, software subscriptions, professional development and courses, business insurance, legal and accounting fees, advertising and marketing, website hosting, phone and internet (business-use percentage), travel expenses (airfare, hotels, 50% of meals for business purposes), contract labor and subcontractor payments, tools and equipment (Section 179 allows immediate expensing up to $1,220,000 in 2025), and bank fees for business accounts. NOT deductible: personal expenses, clothing (unless it's a uniform or protective gear), commuting costs, fines and penalties, and political contributions.
Quarterly Estimated Tax Payments
Self-employed taxpayers must make quarterly estimated payments if they expect to owe $1,000 or more in tax. The due dates for 2026 payments are: Q1 — April 15, Q2 — June 15, Q3 — September 15, Q4 — January 15 (following year). Underpayment penalties are calculated on Form 2210. The safe harbor rule: if you pay at least 100% of last year's tax liability (110% if AGI exceeded $150,000) through estimated payments and withholding, you won't owe an underpayment penalty even if you owe additional tax at filing. Eugene Solutions calculates your estimated payments quarterly to keep you on track.
Key Takeaways
- Self-employment tax rate is 15.3% — deduct half as an income adjustment
- Home office: $5/sq ft simplified method or actual expenses — use whichever is larger
- Standard mileage rate for 2025: 67 cents per mile
- 100% of health insurance premiums are deductible above the line
- SEP-IRA contributions up to 25% of net income ($69K max) for 2025
- Section 179 allows immediate expensing of equipment up to $1,220,000
- Quarterly estimated payments prevent underpayment penalties
Ready to Take Action?
Self-employed? Let Eugene Solutions find every deduction you're entitled to. Book your appointment now.
Our team of PTIN-verified, IRS-authorized tax professionals publishes weekly insights to help individuals and businesses navigate the tax code. Serving all 50 states virtually with physical offices in the Southeast.
IRS Circular 230 Disclosure: Eugene Solutions LLC provides this content for general informational purposes. It does not constitute tax, legal, or accounting advice. Individual tax situations vary. Consult a qualified tax professional for advice specific to your circumstances. Eugene Solutions LLC is subject to IRS Circular 230 professional standards.
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