Self-Employment Tax Deductions You Might Be Missing

I walked a Midtown graphic designer through her 2025 return last month. She’d made $95,000, which is solid freelance money. But she’d filed on her own and written a check to the IRS without thinking about what she could deduct.

We went through her records and found $8,200 in missed deductions. Software subscriptions for her design tools. Her internet and phone bills, partially. Mileage running between clients in Uptown and out to Katy. Health insurance premiums she’d paid out of pocket. A Solo 401(k) she’d never opened.

That $8,200 cost her roughly $2,500 in federal taxes at her bracket. Money she actually earned went straight to the IRS because she didn’t know the rules.

I’ve been doing this for ten years. This story repeats three or four times a week. More people in Houston are going independent. Construction crews, IT consultants, real estate agents, photographers. They make good money but don’t know what counts as a deduction. The opportunities to save taxes are bigger than most realize.

Note: Tax rules change. This is informational, not tax advice. Talk to a tax professional about your specific situation.

The Self-Employment Tax Basics

Here’s the bad news. If you’re self-employed, you pay 15.3% in self-employment tax on your net earnings. That’s 12.4% for Social Security (up to $184,500 in 2026) and 2.9% for Medicare with no cap. Make over $200,000 as a single filer and you pay an extra 0.9% Medicare surtax.

The reason it’s higher than W-2 employees is simple. W-2 workers split that cost with their employer. You pay both halves.

Make $80,000 net and you’re writing a check for $12,240 in self-employment tax alone. That’s before income tax.

The deductions below cut either your taxable income or your self-employment tax, sometimes both.

1. The Deduction for Half of Self-Employment Tax

I see people miss this every single year. The IRS lets you deduct half of the self-employment tax you actually pay. It’s an above-the-line deduction on Form 1040, which means it reduces your AGI whether you take the standard deduction or itemize.

That $80,000 earner paying $12,240 in SE tax gets roughly $6,120 off their AGI right there.

This hits automatically on Schedule SE. But I’ve watched freelancers using basic tax software skip Schedule SE entirely or miss the deduction completely.

2. Home Office Deduction

You can deduct a dedicated space in your home if you use it regularly and only for business. The IRS gives you two ways to calculate it.

Simplified method: $5 per square foot, up to 300 square feet. Max is $1,500 per year.

Actual expense method: Calculate what percentage of your home is business. Apply that percentage to mortgage interest, utilities, insurance, repairs, and depreciation.

I’ve got a writer in Montrose with a 250-square-foot office in a 2,000-square-foot apartment. She pays $2,200 monthly rent. That’s 12.5% business use. Using actual expenses, she deducts about $3,300 just from her rent portion, plus utilities and renter’s insurance. The simplified method would have given her $1,250.

One trap catches people constantly. The space must be used exclusively for business. A corner of the living room that’s also a play area doesn’t qualify.

3. Vehicle and Mileage

Client meeting in the Galleria. Office supply run. Networking event downtown. Every business mile counts.

For 2026, the IRS standard mileage rate is 72.5 cents per mile. That’s up from 70 cents last year.

Drive 8,000 business miles a year and you’ve got a $5,800 deduction right there.

Or use actual expenses. Deduct a proportional share of gas, insurance, maintenance, depreciation, and registration based on your business percentage of total miles.

Two rules trip people up.

Commuting doesn’t count. Driving from home to a regular office isn’t deductible. But if your home office is your main place of business, trips from there to client sites or other business locations are deductible.

You need a log. Paper or app-based records with date, destination, purpose, and miles. No log means the IRS will deny the deduction in an audit.

4. Health Insurance Premiums

Self-employed and not covered through a spouse’s plan. You can deduct 100% of your health insurance premiums. Yours, your spouse’s, dependents’. Medical, dental, vision, even long-term care (with age limits).

Paying $650 a month for marketplace coverage. That’s $7,800 you can deduct. This is above-the-line, so it cuts your AGI directly.

One thing I see missed. COBRA continuation coverage premiums also qualify for this deduction.

5. Retirement Contributions

Self-employed people get access to serious retirement plans with big contribution limits. The deduction reduces your AGI. For 2026, the IRS limits are:

SEP IRA: Up to 25% of net self-employment income (after the SE tax deduction), max $72,000.

Solo 401(k): Employee deferrals up to $23,500, plus employer contributions up to 25% of net self-employment income. Combined max $72,000 (under 50). Age 50+ add $7,500 catch-up.

SIMPLE IRA: Employee contributions up to $17,000 with employer match. Catch-up $4,000 for those 50+.

Make $100,000 net, contribute $20,000 to a Solo 401(k), and you’ve cut your taxable income by $20,000. At the 22% bracket that saves you $4,400 in taxes. You’re building retirement wealth and saving money at the same time.

I see self-employed people, especially new freelancers, skip this entirely. They walk away from thousands in deductions year after year.

6. Business Equipment and Supplies

Ordinary and necessary business expenses are deductible. For freelancers and contractors that’s:

• Computers, monitors, tablets
• Printers and scanners
• Software subscriptions (design tools, accounting, project management)
• Office supplies (paper, pens, ink cartridges)
• Industry-specific tools and equipment
• Reference materials and professional books

Section 179 lets you expense equipment in full the year you buy it instead of depreciating it. For 2026, the limit is high enough to cover most freelancer purchases in one shot.

I had a videographer in the Heights buy a $3,500 camera, $1,200 in editing software, and $800 in lights. That’s $5,500 in deductions.

7. Internet, Phone, and Communication

Use your internet and phone for business. Deduct the business portion. If your internet is 70% business use, deduct 70% of the bill. Cell phone 60% business, deduct 60%.

A dedicated business phone line or internet used only for work is 100% deductible.

Freelancers skip this because the monthly amounts seem small. But $150 a month in combined internet and phone at 70% business use is $1,260 a year.

8. Professional Development and Education

Courses, workshops, conferences, certifications, and subscriptions that maintain or improve skills in your current business are deductible. The IRS lets you deduct qualifying professional development in full.

That includes:

• Industry conferences and trade shows (registration, travel, lodging)
• Online courses and certifications
• Professional books and publications
• Professional organization membership dues
• Licensing and certification renewal fees

What doesn’t count: education for a new career or minimum requirements for a profession you haven’t entered.

A web developer in Houston pays $400 yearly for association memberships, $600 for an online course, and $1,200 to attend a tech conference with travel. That’s $2,200 in deductions.

9. Advertising and Marketing

Everything you spend promoting your business is deductible:

• Website hosting, domain registration, maintenance
• Social media advertising (Google Ads, Facebook, LinkedIn)
• Business cards and printed materials
• Email marketing platform subscriptions
• SEO services
• Portfolio hosting and professional profiles
• Local event sponsorships

A consultant spending $200 a month on Google Ads and $50 a month on email marketing has $3,000 in deductions from those two categories alone.

10. Professional Services

Fees to other professionals for business services are deductible:

• Accountant and bookkeeper fees
• Tax preparation costs (business portion)
• Attorney fees for business matters
• Contract labor and subcontractor payments
• Business coaching and consulting fees

Pay a CPA $1,500 to handle your business taxes and a bookkeeper $300 monthly for clean records. That’s $5,100 in deductible professional services.

11. Business Insurance

Any insurance protecting your business is deductible:

• General liability insurance
• Professional liability (errors and omissions)
• Commercial property insurance
• Cyber liability insurance
• Business interruption insurance

Note: This is separate from the health insurance deduction above. Business insurance premiums go straight on Schedule C as a business expense.

12. The Qualified Business Income (QBI) Deduction

Section 199A lets eligible self-employed people deduct up to 20% of their qualified business income. After the One Big Beautiful Bill Act signed in 2025, this deduction is permanent.

For 2026, the full deduction is available to single filers with taxable income below $200,000 and married-filing-jointly filers below $400,000. Above those thresholds, limitations kick in. Specified Service Trades or Businesses (SSTBs) like consulting, accounting, and law get more restrictions.

A freelance photographer in Houston made $70,000 in qualified business income below the threshold. QBI deduction: $14,000. At the 22% bracket that’s $3,080 in tax savings.

This deduction stacks on top of all the business expense deductions above. You calculate it on your personal return, not on Schedule C.

13. Deductions People Miss Completely

Beyond the big categories, smaller deductions get skipped constantly:

Bank and payment processing fees. Monthly business account fees, credit card processing fees, PayPal and Stripe charges, wire transfer fees. All deductible.

Business travel meals. Meals with clients, prospects, or professional contacts are 50% deductible. Solo meals while traveling for business also count at 50%.

State and local business taxes. Texas has no state income tax, which helps. But business licenses, permits, and the Texas franchise tax (no tax if under $2.47 million revenue) are deductible on your federal return.

Business gifts. Gifts to clients or business contacts are deductible up to $25 per person per year.

Bad debts. Using accrual method and a client never pays an invoice you already reported. That uncollected amount is a deductible bad debt.

Moving business assets. Relocating your home office or moving business equipment. The cost to move those business items may be deductible.

What Houston Freelancers Should Keep in Mind

Texas has no state income tax. That’s good for self-employed workers. But it also means federal taxes are your entire tax bill. Federal deductions matter more than anywhere else.

Houston’s cost of living makes these deductions add up to real money. Home office rent in the Heights or Montrose. Mileage across a sprawling metro area. Health insurance on the Texas marketplace. All run higher than the national average. Higher costs mean larger deductions.

Houston’s gig economy extends way beyond ride-sharing and delivery. Independent consultants, construction crews, photographers, IT contractors, real estate agents, personal trainers. They all file Schedule C and qualify for every deduction above.

Documentation: The Deduction That Saves Your Deductions

A deduction without documentation gets denied. The IRS expects records backing up every deduction you claim. That means:

• Receipts for purchases over $75 (ideally all business expenses)
• Mileage logs with date, destination, purpose, and miles
• Bank and credit card statements showing business transactions in a dedicated business account
• Contracts and invoices for professional services and subcontractor payments
• Home office measurements and home expense records

Digital record-keeping through accounting software or receipt apps is easier than ten years ago. But it’s still your responsibility.

Adding It Up

Here’s what a Houston freelancer making $90,000 net in self-employment income could deduct:

Deduction	Amount
50% of SE tax	$6,885
Home office (actual expense method)	$3,600
Vehicle mileage (6,000 miles)	$4,350
Health insurance premiums	$7,800
Retirement contribution (Solo 401k)	$15,000
Software and equipment	$2,400
Internet and phone (business %)	$1,260
Professional development	$1,200
Advertising and marketing	$2,400
Professional services	$3,000
Business insurance	$1,200
QBI deduction (20% of QBI)	$8,400
Total deductions	$57,495

Not every freelancer claims every category. But most are missing several right now. Catching two or three overlooked deductions usually saves $1,000 to $5,000 in taxes.

Getting It Right

Self-employment tax deductions aren’t hard on their own. The challenge is knowing they exist, tracking them year-round, and applying them correctly at tax time.

Most freelancers and independent contractors in Houston find that working with a tax professional who knows self-employment returns pays for itself the first year. Usually multiple times over.

EZQ Group’s tax planning services help self-employed people identify every deduction they’re entitled to, structure estimated payments right, and build a year-round strategy that keeps money in your pocket. Reach out for a consultation to see what’s being left on the table.