Self-employed taxpayers overpay for two reasons: they miss legitimate deductions out of audit fear, and they waste energy on tiny ones while ignoring the four-figure levers. Here's the honest ranking.
The big four (start here)
1. Retirement contributions
A solo 401(k) lets you contribute up to $24,500 (2026) as 'employee' plus roughly 20% of net self-employment profit as 'employer' — potentially $70,000+ combined. Nothing else on this list comes close. A SEP-IRA is the simpler cousin (about 20% of net profit). Deadline nuance: solo 401(k) elective deferrals want the plan opened by December 31.
2. Self-employed health insurance
Premiums for you and your family deduct above the line — medical, dental, and part of long-term-care premiums — up to your business profit. S corp owners: the premiums must run through your W-2 to keep this one; it's a payroll-setup detail that quietly costs people thousands when missed.
3. The QBI 20%
Automatic on qualified profit if income is below the thresholds — but interacts with everything above (retirement contributions lower QBI while lowering tax; the net is still almost always positive). See our full QBI guide.
4. Half of self-employment tax
Deducted automatically above the line — listed here so you know it's already working.
The nine commonly missed
- Home office, simplified or actual: exclusive-and-regular use of a space gets you $5/sq ft up to $1,500 (simplified) or the business share of rent, utilities, insurance, and depreciation (actual). Renters benefit enormously. The 'red flag' reputation is folklore; the rules just want honesty about exclusivity.
- Vehicle — pick your method deliberately: standard mileage (70 cents/mile for 2025; indexed annually) versus actual expenses with depreciation. High-mileage cheap car → mileage wins. Expensive vehicle, heavy business use → actual + bonus depreciation can win big. You lock trajectories with the first year's choice, so decide, don't default. Either way: contemporaneous mileage log.
- Phone and internet business-percentage — a defensible split, claimed consistently.
- Software, subscriptions, and dues — the $30/month tools add up to real money; so do professional association dues and licenses.
- Education that maintains or improves your current skills — courses, books, conferences (plus the travel to them). New-career education doesn't count.
- Business travel done right: transportation, lodging, 50% of meals. Mixed trips: primary purpose and day-counting decide, and documentation decides audits.
- Startup costs: up to $5,000 deductible in year one (phase-out above $50k of costs), rest amortized — commonly forgotten from the pre-revenue months.
- Bank/processing fees and business insurance — Stripe's cut, the business account fee, liability coverage: all deductible, all frequently untracked.
- Hiring your kids: a sole proprietor paying a child under 18 reasonable wages for real work — no FICA on those wages, deduction for you, standard-deduction-sheltered income for them. Done right with timesheets and actual payment, it's one of the cleanest family tax moves available.
Three myths to retire
- 'Deductions are only worth it if I itemize.' Business deductions live on Schedule C and stack WITH the standard deduction. Different universe.
- 'No 1099 means it's not income' / 'cash income is invisible.' All income is taxable; the new higher 1099 thresholds (see our 1099 guide) changed paperwork, not law.
- 'Claiming X gets you audited.' Disproportionate, undocumented numbers get people audited. A documented home office on a profitable business is routine.
The system that captures all of it
A separate business bank account and card, books updated monthly (not in a January panic), receipts photographed the day they happen, and a mileage app. Deductions aren't found in April — they're recorded all year. If your books are behind, that's fixable fast (see our catch-up bookkeeping playbook), and every month of cleanup usually pays for itself in recovered deductions.
Go deeper in this series
This guide is the hub — each of these covers one specific situation in detail:
