What Business Expenses Can I Deduct? The Real List

The general rule for a business deduction is simple: if an expense is ordinary and necessary for your business, you can deduct it. "Ordinary" means common in your field. "Necessary" means helpful for doing your work. That is the whole test.

The IRS is not trying to trick you here. They genuinely allow a wide range of deductions for self-employed people. The problem is that most freelancers either do not know what qualifies or do not bother tracking expenses carefully enough to claim them.

Here is the real list, organized by category.

Home office

If you use part of your home regularly and exclusively for business, you can deduct it. The key word is "exclusively." Your kitchen table where you also eat breakfast does not qualify. A dedicated room or clearly defined space that is only used for work does.

Two methods: the simplified method ($5 per square foot, up to 300 sq ft, max $1,500/year) or the regular method (actual percentage of home expenses based on square footage). The regular method is more work but usually larger. Most people with a real home office benefit from calculating both.

Technology and software

This is the easiest category for most freelancers because the expenses are obvious and the receipts exist automatically.

For your phone and internet, deduct only the business-use percentage. If you use your phone 70% for work, deduct 70% of the bill. Keep it defensible.

Professional development

Courses, books, conferences, and certifications that maintain or improve skills required in your current work are deductible. The word "current" matters. A course to learn a skill for a completely new career is not deductible.

Travel and transportation

Business travel is deductible. Commuting is not. The line is whether the travel is to a specific business destination rather than to your regular workplace (which for many freelancers is their home office).

Marketing and client acquisition

Professional services

Insurance

Retirement contributions

Contributions to a SEP IRA or Solo 401(k) are deductible from your gross income, reducing both income tax and, in some configurations, self-employment tax. This is one of the most valuable deductions available to self-employed people.

SEP IRA: up to 25% of net self-employment income, max $69,000 for 2024. Solo 401(k): up to $23,000 employee contribution plus up to 25% employer contribution, max $69,000 total. Both are legitimate deductions and worth the paperwork.

The things that do not count

The actual move: track everything

None of this matters if you do not have records. The IRS expects you to substantiate deductions with receipts, bank statements, or other documentation. The bar for an audit is usually "can you show me a receipt and explain what this was for?"

The cheapest and easiest system: a dedicated business bank account and credit card. Every business expense runs through those accounts. At tax time, you export the statements. Done. The separation alone eliminates 80% of the headache.