Being self-employed comes with a lot of freedom—but also a lot of responsibility, especially when it comes to taxes. Without an employer handling withholdings and deductions for you, every dollar earned—and every dollar saved—counts. One of the biggest ways to reduce your tax bill legally is by taking advantage of all the deductions available to you. Yet many self-employed individuals leave money on the table simply because they’re not aware of what they can deduct.
At Martinez Income Tax, we specialize in helping self-employed workers and small business owners navigate the complex U.S. tax system. In this post, we’re highlighting five of the most commonly overlooked tax deductions that could save you hundreds—or even thousands—of dollars each year.
1. Home Office Deduction
If you run your business from home or even just manage your operations there, the home office deduction can be a game-changer. Many people assume this is only for full-time remote workers or fear taking the deduction might trigger an IRS audit. But the truth is, if you use a part of your home exclusively and regularly for business purposes, you likely qualify.
There are two methods for claiming this deduction:
- Simplified method: Deduct $5 per square foot of your home office (up to 300 square feet).
- Regular method: Deduct a percentage of actual expenses—like rent or mortgage interest, utilities, repairs, property taxes, and home insurance—based on the office’s square footage compared to your home.
For example, if your home office is 10% of your total home’s square footage, you can deduct 10% of qualifying household expenses. This adds up quickly!
2. Vehicle and Mileage Expenses
If you use your car to visit clients, run business-related errands, attend meetings, or travel between work sites, those miles and expenses can be deducted. Self-employed individuals often underestimate how much they use their personal vehicles for work—and that’s a costly mistake.
The IRS offers two ways to claim vehicle deductions:
- Standard mileage rate: For 2024, that’s 67 cents per mile.
- Actual expense method: Track all vehicle-related expenses like gas, maintenance, insurance, registration, and depreciation, then deduct the business-use percentage.
Let’s say you drove 3,000 miles for work in 2024. That’s $2,010 in deductions using the standard mileage rate. To claim either method, you need to keep a mileage log or use a mileage tracking app. Don’t rely on estimates—accurate records are key if the IRS ever comes knocking.
3. Self-Employed Health Insurance Deduction
Paying for your own health insurance isn’t fun—but the IRS offers a silver lining. If you’re self-employed and not eligible to participate in a health plan through an employer or spouse, you can deduct 100% of your health insurance premiums, including dental and long-term care. This deduction isn’t taken on your Schedule C; instead, it goes directly on your Form 1040 as an adjustment to income. That means it reduces your adjusted gross income (AGI), potentially qualifying you for more credits and deductions.
It’s important to note that you can’t deduct more than your business’s net income. So, if you didn’t make any money this year, you might not qualify—but for many self-employed individuals, this is a major deduction worth taking advantage of.
4. Retirement Plan Contributions
Saving for retirement not only secures your future, but it also gives you a powerful tax break today. There are several retirement plans designed specifically for self-employed individuals, including:
- SEP IRA
- SIMPLE IRA
- Solo 401(k)
These plans allow for much higher contribution limits than traditional IRAs. For example, in 2024, with a Solo 401(k), you can contribute up to $69,000 if you’re 50 or older ($66,000 if under 50), combining your employee and employer contributions.
Every dollar you contribute reduces your taxable income. So not only are you preparing for retirement—you’re also paying less to the IRS right now.
5. Deduction for Self-Employment Tax
When you’re self-employed, you pay both the employer and employee portions of Social Security and Medicare taxes—a combined 15.3% self-employment tax. While that can feel like a heavy burden, the IRS does allow some relief. You can deduct half of your self-employment tax when calculating your adjusted gross income. This deduction doesn’t reduce the tax you owe directly, but it does reduce your taxable income, which lowers your overall income tax bill.
It’s an automatic deduction that you’ll see reflected when you file your Form 1040 with a completed Schedule SE. While it might not be the flashiest deduction, it can still make a meaningful difference, especially if you had a strong earnings year.
Conclusion and Final Thoughts:
Running your own business or freelancing full-time already comes with a lot of pressure—don’t let taxes add unnecessary stress. Missing out on deductions like these could mean you’re paying more than you have to. And while the IRS tax code is complicated, you don’t have to navigate it alone.
Keep in mind: For a business expense to be deductible, it must be both ordinary and necessary for your work. Always maintain clear records, keep receipts, and if possible, use accounting software to track everything throughout the year—not just during tax season.
Ready to Maximize Your Deductions?
At Martínez Income Tax, we’re here to help you keep more of what you earn. Whether you’re a seasoned contractor, a new freelancer, or run a side hustle, our experienced team can walk you through every eligible deduction and file your taxes accurately and on time.
📞 Call us today to schedule a free consultation
💼 Get personalized advice for your business
💰 Pay less in taxes—legally and confidently
Don’t leave money on the table this tax season. Let us help you get every dollar you deserve.
