When you work for yourself, you are taxed on profit, not on everything you receive. Business expenses reduce that profit, so recording them carefully matters. It is also an area full of myths, from the idea that anything bought through a business is deductible to the fear that claiming a home office invites an audit. This section explains how deductions work in practice, using the IRS's own definitions and forms, so you can claim what you are entitled to and nothing you are not.
What makes an expense deductible
The general test for a business deduction is that the expense is both ordinary, meaning common and accepted in your kind of business, and necessary, meaning helpful and appropriate for it. It does not have to be indispensable. Personal expenses are not deductible, and some business expenses have specific limits or rules.
That test explains most cases. Software you use for client work passes. A family holiday does not become deductible because you answered an email on the beach.
Common categories
For most self-employed people, deductions fall into familiar groups:
- equipment and software
- supplies and materials
- advertising and marketing
- professional fees, such as accounting or legal help
- insurance for the business
- business travel and some meals, with specific rules
- vehicle costs for business driving
- business use of your home, if you qualify
- phone and internet, for the business share
- education that maintains or improves skills used in the current business
- fees charged by payment processors and platforms
The guides in this section take these one at a time, with the rules and records each needs.
Mixed-use expenses
Many costs are partly business and partly personal: a phone, an internet connection, a car, a room in your home. Generally, only the business share is deductible, and you need a reasonable way to work out that share. A log, a measurement or a documented estimate method gives you a figure you can explain.
Big purchases
Equipment that lasts beyond the year is often treated differently from everyday expenses. Depending on the item and the rules that apply, its cost may be deducted over several years through depreciation, or in some cases deducted earlier under specific elections. These rules change over time, so the guides that cover them state the tax year.
Records make the deduction
A deduction you cannot document is a deduction you may lose. For each expense, keep evidence of the amount, date, who was paid and the business purpose. Receipts, invoices, bank and card statements, mileage logs and calendars all help. Recording the business purpose at the time, even in a short note, is far easier than reconstructing it later.
Home and vehicle
Two deductions deserve particular care because they involve personal assets. The home office deduction has specific requirements about how the space is used and offers two calculation methods. Vehicle expenses can be claimed using a standard rate per business mile or actual costs, with rules about when you choose. The guides cover both in detail.
The guides in this section
The guides cover specific deductions in turn, from the standard mileage rate to software, phones, travel, meals, education and equipment. Guides that include figures, such as mileage rates or limits, state the tax year they apply to and link to the IRS source. Start with the categories that make up most of your spending.
Guides in this section
- Business gifts: what you can deduct
The per-person limit on business gifts, what does not count toward it, gifts versus entertainment, and the records to keep.
- The standard mileage rate, and how to use it
Claiming business driving at the IRS standard rate: splitting miles, the first-year rule and logs.
- Vehicle expenses: standard mileage or actual costs
The two ways to deduct business driving, which trips count, when each method is allowed, and the records that support the deduction.