Naturally, corporations can claim large business expense deductions, but that does not mean that small business owners, including self-employed individuals, are left out in the cold. Following are seven common write-offs available to self-employeds.

  1. Health and dental insurance: Yes, a self-employed individual can currently deduct the full cost of health and dental insurance, just like the corporate bigwigs. This includes premiums for you, your spouse and dependents under age 26. Icing on the cake: The deduction is claimed “above the line” on your personal tax return, so it reduces adjusted gross income (AGI) for other tax purposes.
  2. Retirement plan contributions: Besides benefitting from tax-deferred growth, you can write off contributions to a qualified retirement plan within generous limits. There are numerous options ranging from Simplified Employee Pensions (SEPs) to Savings Incentive Match Plans for Employees (SIMPLEs) to solo 401(k)s and more. As with health insurance, retirement plan contributions are deductible above the line.
  3. Vehicles: When you use a vehicle for both business and personal driving, you may deduct costs attributable to business travel. For example, if your car is used 75% for business driving in 2022, you can deduct 75% of your vehicle costs—oil and gas, repairs, insurance, etc.—plus depreciation subject to certain limits.  Caution: The IRS imposes strict substantiation requirements. In lieu of keeping all the required records, you may use a standard mileage rate of 58.5 cents per business mile for the first six months of 2022 and 62.5 cents per business mile for the last six months (plus related tolls and parking fees).
  4. Business travel: Are you taking long-distance business trips again? If so, you might fly to another city for a face-to-face meeting with a top client. Accordingly, you can deduct your travel expenses, including the round-trip airfare, lodging and meals and other incidentals (e.g., Uber, Lyft or cab fares).  The primary purpose of your trip must be business-related. Although you can spend some time on pleasurable activities like sightseeing, this cannot be a vacation in disguise.
  5. Business meals: Despite a recent legislative crackdown on business entertainment, you may still claim a deduction for meals while you are away from home on business. Notably, the IRS has approved deductions for food and beverages incurred in connection with business-related entertainment—for example, at a sporting event—if charged separately from the entertainment.  Furthermore, the usual 50% deduction limit on business meals is doubled to 100% for 2021 and 2022 for restaurant-provided fare.
  6. Home office expenses: Currently, you cannot deduct home office expenses if you are a corporate employee, but self-employed individuals are not affected by this restriction.  To qualify for deductions, you must use the home regularly and exclusively as your principal place of a business or a place to meet or deal with clients, customers or patients in the normal course of business. If you have no fixed place of business, doing administrative work at home may suffice. Note: Other special rules may apply.
  7. Self-employment tax: Finally, a self-employed individual must pay self-employment tax, the equivalent of payroll tax for employees. As with employees, the Social Security portion of self-employment tax is imposed on amounts up to an annual threshold ($147,000 for 2022).  Unfortunately, the usual 7.65% rate for employees is doubled to 15.3% for self-employment tax, but you can deduct half of this tax above the line.

These are just seven potential deductions for self-employed individuals. Contact your tax advisor concerning your situation.