Self-Employment Tax Deductions Reference
Self-employed individuals can claim deductions at two levels. Above-the-line deductions on Schedule 1 reduce adjusted gross income and include the deductible half of self-employment tax, 100% of health insurance premiums for self and family, and retirement plan contributions. Schedule C business deductions reduce net self-employment income directly and include vehicle mileage (at the IRS standard rate of dollar 0.70 per mile for 2025), home office expenses using either the simplified method (dollar 5 per square foot, up to dollar 1,500) or actual expenses, and other ordinary business costs like advertising, supplies, and professional fees. This reference tool combines both levels and estimates your total tax savings at your marginal rate. All figures comply with IRS Publication 535 and current tax notices.
Self-employed individuals with $80,000 net SE income can claim estimated above-the-line deductions of -- and Schedule C deductions of --, for a total of --.
Above-the-line deductions (Schedule 1, Form 1040)
Above-the-line deductions reduce your adjusted gross income (AGI) and are available whether or not you itemise. They are claimed on Schedule 1 of Form 1040.
1. Deductible half of self-employment tax (IRC Section 164(f))
When you are self-employed, you pay both the employer and employee halves of Social Security and Medicare taxes. The employer half would be a deductible business expense for any incorporated employer, so Congress granted self-employed individuals a matching deduction. The deduction equals 50% of your total SE tax, computed on Schedule SE. It does not reduce the SE tax itself, only your income subject to income tax.
Net SE income x 0.9235 = SE earnings
SE tax = SE earnings x 15.3% (on first $176,100) + SE earnings x 2.9% (above $176,100)
Deductible amount = SE tax x 50%
2. Self-employed health insurance deduction (IRC Section 162(l))
Self-employed individuals may deduct 100% of premiums paid for health, dental, and qualified long-term care insurance for themselves, their spouse, and dependents. The deduction is limited to your net self-employment income from the business under which the plan was established. You cannot claim this deduction for any month you were eligible for employer-subsidised health coverage (for example, through a spouse's employer plan).
3. Retirement plan contributions (IRC Section 404)
Solo 401(k) plans allow total contributions up to $70,000 for 2025 (employee elective deferrals of up to $23,500 plus employer profit-sharing contributions up to 25% of net SE income). SEP-IRA contributions are limited to 25% of net SE income (after deducting half of SE tax), capped at $70,000. Contributions are deducted on Schedule 1. See IRS one-participant 401(k) plans for full rules.
Schedule C business expense deductions
Schedule C deductions reduce your net business profit and therefore also reduce your SE tax base. Every deductible expense must be ordinary (common in your trade) and necessary (helpful and appropriate for your business) under the standard set by IRC Section 162.
Vehicle and mileage (IRS Notice 2025-5)
The 2025 standard mileage rate is $0.70 per business mile. You must keep a contemporaneous mileage log recording the date, destination, business purpose, and miles driven for each trip. The standard mileage rate includes all vehicle operating costs; you cannot also deduct fuel or insurance separately. The actual expense method (tracking all vehicle costs and applying the business-use percentage) is an alternative if your actual costs exceed the standard rate.
Home office deduction (IRC Section 280A)
Using the simplified method, you may deduct $5 per square foot of dedicated office space, up to a maximum of 300 square feet ($1,500 maximum deduction). The space must be used regularly and exclusively for business. The actual expense method may yield a larger deduction; a dedicated page covers both methods in detail at Home Office Deduction Calculator.
Other commonly deductible business expenses
- Business insurance premiums: professional liability (E&O), general liability, business property insurance.
- Professional development: courses, books, subscriptions to trade publications directly related to your business.
- Equipment and Section 179: computers, tools, machinery. Section 179 allows immediate expensing up to $1,220,000 (2025). See Depreciation Calculator.
- Software and SaaS: business software subscriptions are currently deductible under Revenue Procedure 2000-50 or as a Section 179 expense.
- Professional services: accounting, bookkeeping, legal fees incurred for your business.
- Advertising and marketing: website hosting, paid ads, business cards, promotional materials.
- Business travel: flights, lodging, and 50% of meals when travelling away from home overnight for business purposes.
- Phone and internet: the business-use percentage of your phone and internet bills.
- Office or studio rent: rent paid for a separate business location (not a home office) is fully deductible.
Self-employment deductions: frequently asked questions
What is the deductible half of self-employment tax?
Self-employed individuals pay both the employer and employee shares of FICA (15.3% on net SE income up to the Social Security wage base, then 2.9% Medicare above that). Because employees only pay half and the employer half is a business expense, IRS allows self-employed individuals to deduct 50% of their SE tax as an above-the-line adjustment on Schedule 1 (Line 15). This deduction does not reduce SE tax itself, only income tax.
Can I deduct 100% of health insurance premiums as self-employed?
Yes, under IRC Section 162(l) self-employed individuals can deduct 100% of health, dental, and qualified long-term care insurance premiums paid for themselves, their spouse, and dependents. The deduction is above-the-line on Schedule 1 and cannot exceed your net self-employment income. You cannot claim this deduction for any month you were eligible to participate in an employer-subsidised health plan.
What is the 2025 standard mileage rate for business driving?
The IRS standard mileage rate for business use of a vehicle is $0.70 per mile for 2025, as announced in IRS Notice 2025-5. You can use the standard mileage rate instead of tracking actual vehicle expenses (fuel, insurance, repairs, depreciation). You must choose the standard mileage rate in the first year you use the vehicle for business; actual expense method is also available but requires detailed records.
How does the home office deduction interact with Schedule C deductions?
The home office deduction under IRC Section 280A reduces your Schedule C net profit. Using the simplified method ($5 per square foot, up to $1,500), you claim the deduction directly on Schedule C. Using the actual expense method, you complete Form 8829 and carry the result to Schedule C. The deduction cannot reduce Schedule C income below zero; any disallowed amount carries forward to the next year.
What retirement contributions can a self-employed person deduct?
Self-employed individuals can contribute to a Solo 401(k) or SEP-IRA. For 2025, the total contribution limit for a Solo 401(k) is $70,000 ($77,500 with the $7,500 catch-up if age 50 or older). SEP-IRA contributions are limited to 25% of net self-employment income (after deducting half of SE tax), capped at $70,000. Contributions are deducted above-the-line on Schedule 1 and reduce both income tax and, for SEP-IRA, indirectly your AGI.
Are meals 100% deductible for the self-employed?
No. Business meals are generally 50% deductible under IRC Section 274(n). The meal must have a bona fide business purpose and the taxpayer or an employee must be present. Entertainment expenses (concerts, sporting events) are not deductible at all since the Tax Cuts and Jobs Act of 2017. Travel meals while away from home overnight for business are also 50% deductible.
Official sources
- Deductible business expenses: IRS Publication 535, Business Expenses.
- 2025 standard mileage rate: IRS Notice 2025-5.
- Self-employed health insurance deduction: IRS Self-Employed Health Insurance Deduction.
- Solo 401(k) contribution limits: IRS One-Participant 401(k) Plans.
Reviewed by the CalculatorHub team, edited by James Graham, 13 June 2026. See our methodology. General information only, not tax advice. Consult a qualified tax professional for your specific situation.