Business Expenses Freelancers Commonly Deduct (General Overview)
General information for US federal taxes. Not tax advice. Whether a cost is deductible depends on your facts. See IRS resources such as Publication 334 and Schedule C, or ask a tax professional.
Deductions matter twice for freelancers: they reduce income tax and also self-employment tax, because both are charged on profit. See SE tax explained.
The basic test
The IRS standard is that a business expense must be ordinary and necessary for your trade or business, meaning common and accepted in your field and helpful and appropriate for it. Personal expenses are not deductible. Mixed-use items generally need a reasonable split between business and personal use.
Common categories
The IRS groups business expense topics such as insurance, rent, taxes, interest, employee pay, and travel, gift and vehicle expenses. Freelancers commonly look at:
| Category | Examples | Notes |
|---|---|---|
| Software and subscriptions | design tools, project management, accounting software | Business use portion only |
| Equipment | laptop, monitor, camera | Larger purchases may be depreciated or expensed under special rules; ask a professional |
| Professional services | accountant, lawyer, bookkeeper | Fees related to the business |
| Marketing | website, domain, ads | Business promotion |
| Education | courses and books that maintain or improve skills in your current business | Training for an entirely new business is treated differently |
| Phone and internet | business share of the bill | Keep a reasonable allocation |
| Travel | transportation and lodging for business trips | Documentation requirements apply |
| Insurance | professional liability, business insurance | |
| Home office | see the home office guide | Strict requirements |
Self-employed health insurance premiums have their own deduction (the IRS provides Form 7206 for it), separate from Schedule C expenses.
Capital purchases vs expenses
Some purchases are spread over years (depreciation) and some can be deducted in the year of purchase under special elections. The rules and limits change, so ask a professional before a large purchase.
Record keeping habits
- Use one business bank account and card; do not mix personal spending.
- Photograph or save receipts the day you buy.
- Note the business purpose for meals, travel and mixed-use items.
- Reconcile monthly rather than at tax time.
Accounting software helps with categorization and receipt capture; for example, FreshBooks' published Plus plan lists receipt scanning (FreshBooks), and QuickBooks tracks income and expenses even on its free tier (QuickBooks Online). We have not tested either; see our comparison.
See what it does to your tax
Plug lower profit into our tax set-aside calculator to see how deductions change the total.