5 Tax Deductions for Freelancers and the Self-Employed
In short
Home office, QBI, health insurance, retirement plans and half of SE tax: what each is worth in 2026, and which lower self-employment tax.
Five deductions do most of the work for freelancers: the home office, the 20% qualified business income (QBI) deduction, self-employed health insurance, retirement plan contributions and the deduction for half of your self-employment tax. Only business expenses such as the home office lower the 15.3% self-employment tax itself. The other four lower income tax only.
Self-employment tax for 2026 is 15.3% of 92.35% of net profit: 12.4% for Social Security on earnings up to $184,500, plus 2.9% for Medicare with no cap. Our self-employment tax guide walks through that calculation and quarterly payments. This guide covers what lowers the bill.
1. The Home Office Deduction
The space must be used regularly and exclusively for your business. You can figure the deduction two ways, and you choose each year:
- Simplified method: $5 per square foot, up to 300 square feet, so at most $1,500. No depreciation, and nothing to recapture when you sell the home.
- Regular method: the business share of actual costs such as rent or mortgage interest, utilities, insurance and depreciation. More records, and depreciation is recaptured on a later sale, but it can be larger for a big office or high housing costs.
Under either method the deduction can't exceed the gross income from the business use of the home, less other business expenses. W-2 employees who work from home can't claim it.
2. The Qualified Business Income (QBI) Deduction
Sole proprietors, single-member LLCs and partners can generally deduct 20% of qualified business income. Two limits matter for most freelancers:
- The taxable income cap: the deduction can't exceed 20% of your taxable income before the QBI deduction. For many freelancers this cap, not the 20% of profit, is the one that binds.
- The service business phase-in: for 2026, consultants, lawyers, accountants and other specified service businesses start losing the deduction above $201,750 of taxable income ($403,500 married filing jointly), and lose it fully at $276,750 ($553,500).
New for 2026, a taxpayer with at least $1,000 of qualified business income gets a minimum deduction of $400.
3. Self-Employed Health Insurance
If you pay for your own health coverage, you can generally deduct the premiums for yourself, your spouse, your dependents and a child under 27. It is taken on Schedule 1, so it counts even if you don't itemize. The catch: you can't deduct premiums for any month you were eligible for a subsidized health plan through your own employer or your spouse's, even if you didn't enroll.
4. Retirement Plan Contributions
- SEP-IRA: for a self-employed person the limit works out to 20% of net earnings (net profit minus the half-SE-tax deduction), capped at $72,000 for 2026.
- Solo 401(k): you contribute as the employee (up to $24,500, plus $8,000 at 50 or older, or $11,250 at 60 to 63) and as the employer (the same 20% calculation). Total additions are capped at $72,000, not counting catch-ups. The $24,500 is per person, so deferrals to a day job's 401(k) count against it.
Pre-tax contributions cut income tax this year; they do not reduce self-employment tax. See our 2026 401(k) limits guide for the catch-up rules.
5. Half of Self-Employment Tax
You deduct half of your self-employment tax on Schedule 1. It mirrors the employer half of payroll tax that an employee never pays income tax on. Tax software computes it for you; it matters mainly when you estimate your own quarterly payments.
| Deduction | Lowers SE tax? | Lowers income tax? |
|---|---|---|
| Home office (and other business expenses) | Yes | Yes |
| QBI deduction | No | Yes |
| Self-employed health insurance | No | Yes |
| SEP or solo 401(k), pre-tax | No | Yes |
| Half of SE tax | No | Yes |
Worked Example: A 300 sq ft Home Office
Single filer, $60,000 net profit before the home office, no other income, $16,100 standard deduction. The simplified method gives 300 × $5 = $1,500, so net profit becomes $58,500.
| Without | With | |
|---|---|---|
| SE tax (profit × 92.35% × 15.3%) | $8,477.73 | $8,265.79 |
| Half-SE-tax deduction | $4,238.87 | $4,132.89 |
| QBI deduction (capped at 20% of taxable income) | $7,932.23 | $7,653.42 |
| Taxable income | $31,728.91 | $30,613.69 |
| Federal income tax | $3,559.47 | $3,425.64 |
| Total federal tax | $12,037.20 | $11,691.43 |
The office saves $345.77: $211.94 of SE tax and $133.83 of income tax. For the SE tax line, $58,500 × 0.9235 = $54,024.75, and × 0.153 = $8,265.79.
Now add $6,000 of health insurance premiums. SE tax doesn't change. Income tax falls by $576.00, not the $720 you'd expect at 12%, because taxable income before QBI drops $6,000, so the capped QBI deduction drops $1,200. Taxable income falls $4,800, and $4,800 × 12% = $576.
What This Doesn't Cover
This guide leaves out the W-2 wage and property limits on QBI above the thresholds, the regular home office method's depreciation math, state taxes, and S corporation payroll strategies. A CPA or enrolled agent can check which deductions fit your business and how to document them.
Run Your Own Numbers
Enter your net profit to see SE tax, the half-SE and QBI deductions, and your quarterly payment. The example above uses the same formula.
Open the Self-Employment Tax CalculatorSources
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