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Are you a freelancer? If so, you are in good company. Last year, almost 40% of the U.S. population did freelance work.

As the gig economy surges and more people participate, it’s important to be aware of the taxes you owe and the deductions you can take. Those deductions can help lower the amount of taxes you owe and help you keep more of your hard-earned money, so you’ll want to claim what’s due to you.

Taxes for those who are self-employed can get complex, and tax laws can change frequently. It’s therefore wise to do your research or hire a tax professional who focuses on freelance taxes.

But whether you choose to work with a tax pro, or go it on your own, it can be very helpful to know about the self-employed tax deductions that are usually allowed. To help you get up to speed, read on for 25 tax deductions that many freelancers can take.

Self-Employed Tax Deductions You Won’t Want to Miss

When considering whether an expense is deductible or not, you may want this rule of thumb in mind: The Internal Revenue Service (IRS) guideline for freelancer tax deductions is that expenses must be ordinary and necessary.

If you purchase an item or incur an expense even if you weren’t running your freelance business, it likely would not qualify for a deduction.

Below are some key deductions you may be able to qualify for. Knowing and noting them can help you with financial planning for freelancers.

1. Home Office

Are you earning money from home? If so, one of the most common deductions for freelancers is claiming a home office on your taxes. To take this deduction, the designated space must be used regularly and exclusively for business operations, and must be the principal location where business is conducted.

You can take this deduction whether your own or rent. You can use the simplified method, which has a rate of $5 per square foot for business use of the home, with a maximum deduction of $1,500 (or 300 square feet), according to the IRS .

Or, you can use the regular method, which divides expenses of operating the home (including mortgage/rent, real estate taxes, utilities, home insurance) between personal and business use.

Calculating Home Office Tax Deductions

To maximize your deduction for a home office you may want to calculate both the simplified and the regular techniques to see which is higher.

•   As mentioned above, the simplified method involves calculating your home office’s square footage (up to a cap of 300 square feet), and multiplying that by five.

•   For the regular method, you would use IRS Form 8829 to figure out the number. While this is a more involved calculation, it might yield a higher number.

2. Office Supplies

Looking for more tax deductions for freelancers? The materials you purchase to work in your home office, such as paper, pens, pencils, pads, printer ink, staples, paper clips, etc, can typically be deducted at full cost as long as the items are used for business.

3. Hardware and Equipment

If you require specific hardware, such as a laptop, personal computer, tablet, or other types of equipment to run your business, these purchases may count as deductions.

Or maybe you earn money from a side hustle like photography or jewelry making, which requires specialized equipment.

You may want to talk to your accountant about the best way to deduct these expenses, as some bigger purchases that will be used beyond one year may need to be depreciated over a set number of years, rather than deducted in full.

4. Web Hosting and Online Tools

If you have a website and pay fees for web hosting, these expenses can likely be deducted from your taxes. If you use other online tools for your business (such as Dropbox or Zoom), fees you pay for these services can also usually be deducted.

5. Phone And Internet Service

If you use the internet, a landline phone, or a cell phone for business at least some of the time, these services may qualify for a deduction.

You may want to keep in mind, however, that you can generally only deduct a portion based on your business usage.

6. Start-Up Costs

Here’s another freelance tax deduction: You may be able to deduct up to $5,000 of initial purchases and investments made to get your business up and running in its first year. Purchases that exceed that amount can often be deducted over time.

7. Employee Salaries

The cost of paying employees to work within a business can usually be deducted. These costs generally include both wages and benefits.

8. Self-Employment Tax

Are you a 1099 worker? Self-employment taxes cover freelancer contributions toward Social Security and Medicare. You can generally deduct the employer-equivalent portion of your self-employment tax, which is half the total self-employment tax.

9. Your Car

The entire cost of ownership and maintenance of any vehicle used strictly for business purposes can typically be deducted from business income (subject to some limits). The IRS mileage rate for tax year 2025 is 70 cents per mile driven for business use.

Cars driven for both business and personal use can also be deducted, but only for costs incurred while conducting business. It’s wise to set up a system to keep track of when you are driving for personal vs. professional purposes.

10. Unpaid Invoices

Also known as bad debt, unpaid invoices (meaning your business is owed money that it has no hope of reclaiming) may be deductible.

However, in order for the deduction to be allowed, it must be clear to both parties that the transaction was not a gift.

11. Business License

Depending on the industry, certain state and federal licenses may be required for a business to operate. However, there may be an amortization schedule to be aware of, meaning you would deduct percentages of the cost over time.

The fees paid annually to state or local governments for obtaining those licenses can generally be deducted.

It’s wise to look further into the tax code to be sure you understand how to properly take these deductions.

12. Qualified Business Income

This is a newer self-employment deduction. The qualified business income deduction (QBI) is a tax deduction that allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income on their taxes. There are income limits to qualify, however, and this benefit is currently scheduled to be phased out after 2025.

13. Product Supplies and Storage Units

For freelancers who sell products, the supplies purchased in order to make those products can usually be a freelance tax deduction.

The costs of keeping business supplies and assets in a storage unit can generally also be deducted, since storage is an expense factored into the overall cost of the goods sold.

14. Business Loan Interest

If you’ve taken out a loan to help fund your business, you may be able to deduct the interest you incur from it as a business expense.

For this to be deductible, however, a freelancer must be legally liable for that debt. In addition, both the freelancer and the lender must intend that the debt be repaid and have a true debtor-creditor relationship.

15. Meals

Sorry, buying takeout and eating it at your desk isn’t tax-deductible. But if you are traveling for business, at a conference, or dining with a client, then you can deduct 50% of the cost if you have the receipt. If you don’t have the receipt, you can take off 50% of the standard meal allowance.

16. Transaction Fees

If part of your business involves processing credit card orders, you may have an additional freelancer deduction. The processing costs a freelancer may incur by accepting credit cards payments is usually deductible as a qualified business expense.

17. Attorney & Accountant Fees

The fees charged by attorneys and accountants that are related to operating your business are typically considered tax-deductible business expenses.

That includes tax preparation fees, as well as any additional tax resolution expenses that pertain to your business.

18. Education Costs

Freelancer deductions can include the cost of education that helps you maintain or improve skills needed in your present work. This tax deduction also typically includes costs for books, supplies and even transportation.

19. Industry Events

Fees for attending conferences or conventions that are business related can typically be deducted.

Not only are the admission or registration fees often deductible, but all reasonable travel expenses accrued in order to attend the event may be deductible as well.

20. Promotional Materials

Tools used for marketing, advertising, and the general promotion of a business are considered deductible expenses. That includes advertising your product or service on social media or elsewhere.

Any expenses incurred in order to influence legislation (such as lobbying), however, are not deductible.

21. Business Membership Fees

While you generally can’t deduct dues or fees paid for memberships in clubs organized for recreational or social purposes, dues paid to join organizations that align with your specific business industry are usually considered deductible.

This includes organizations, such as boards of trade, chambers of commerce, and professional organizations (like bar associations and medical associations).

22. Business Travel Expenses

Travel costs that are associated with conducting business are considered valid income tax deductions, as long as they are ordinary and necessary and last more than one workday.

This can include flights, hotel stays, meals, getting around locally via bus/train/ride sharing services, even dry cleaning or laundry expenses while you’re away from home.

You may want to keep in mind that lavish and extravagant travel conditions generally do not qualify for deduction.

Also, day-to-day commuter expenses between home and business are not typically deductible.

23. Business Gifts

If you give a gift to a client or vendor as a thank you for conducting business with you, the cost of the gift is generally deductible up to $25 per person per year.

Extra costs such as engraving, packing, or shipping aren’t included in the $25 limit if they don’t add significant value to the gift.

24. Health Insurance

Self-employed individuals with qualifying policies are typically allowed to deduct premiums for health, dental, and long-term care for themselves and their families.

25. Retirement Plan Contributions

Just because you don’t work for a large company doesn’t mean you can’t benefit from a tax-advantaged retirement plan. Indeed, freelancers often have even more options for saving this way.

Two self-employed retirement options you may want to consider: a traditional IRA or SEP IRA. A traditional IRA allows you to contribute up to $7,000 per year in pre-tax dollars ($8,000 if your 50-plus) for 2025 and up to $7,500 ($8,600 if your 50-plus) for 2026. A SEP IRA allows you to contribute up to 25% of your income for a maximum of $70,000 per year for tax year 2025 and a maximum of $72,000 for 2026.

Claiming Tax Deductions

Why is it important to claim tax deductions? They will help lower how much you pay in taxes and increase how much you keep to spend and save.

If, say, you earn $120,000 in a given year and can claim $25,000 in tax deductions, then you would only be paying taxes on $95,000. That can make a big difference in your daily financial life as well as your ability to build wealth and hit your financial goals.

Tips for Freelancer Tax Deductions

If you are a freelancer, there are a couple of smart guidelines to follow as you move through the tax year.

Keeping Records of Everything

As you earn, spend, and save as a freelancer, it’s important to make a budget and track where your money is going. Keeping records of how much you are paid from different clients or customers, what you are spending on your business, and when and where those expenses are incurred (and even how they are paid) can make a big difference when tax preparation time rolls around.

Also, if you ever need that information if audited, you will be glad you have those files.

Keeping Your Personal and Business Finances Separate

As you have learned, it’s important to keep your business and personal finances separate when you are self-employed. This means your workspace, your transportation and meal expenses, and the like.

This will have important implications at tax time. For instance, you may have to parse how much of your rent or mortgage and your utilities actually go towards your home-based business vs. personal use.

•   Opening a separate bank account for your business. It can be a smart move to keep your business finances separate from your personal to clarify your professional earning and spending. Many financial institutions offer business accounts to meet these needs. If you are just launching a side hustle or have a small, part-time gig, you might simply open up an additional checking and savings account to start.

Working With a Tax Professional

It’s not always easy to decipher the tax code as a freelancer or know which expenses qualify and to what expense.

Sometimes, working with a qualified tax professional can help. They are trained to know the ins and outs of the law and can guide you on correct tax filing.

The IRS offers guidelines for choosing a reputable tax professional that can be worth reading.

The Takeaway

As a freelancer, you can often lower your tax liability by deducting expenses that were incurred to operate your business.

There are a wide range of deductions you may be able to take, including some or all of your expenses for a home office, supplies for that home office, business events, advertising, self-employment taxes, and more.

In addition to managing your business income, you’ll also want to consider the full breadth of financial services you need, and compare which banking partner is best for your needs, whether personal or professional.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Do freelancers need to declare income?

Yes, if you are a freelancer, you need to declare your income and pay taxes on it. It is wise to pay quarterly estimated taxes to avoid a large tax bill and potential penalties at tax time.

How is income tax calculated for freelancers?

In addition to regular income tax, freelancers typically need to pay a self-employment tax of 15.3% to cover Social Security and Medicare taxes. Typically, employees and their employers split that bill. But self-employed people pay the whole thing.

What happens if you don’t file freelance taxes?

Not filing freelance taxes doesn’t mean you don’t owe them. Not paying taxes can mean you are still liable for the amount you owe, plus interest and penalties.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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Your vested 401(k) balance is the portion of your 401(k) you fully own and can take with you when you leave your employer. This amount includes your employee contributions, which are always 100% vested, any investment earnings, and your employer’s contributions that have passed the required vesting period.

Here’s a deeper look at what being vested means and the effect it can have on your retirement savings.

What Does Vested Balance Mean?

The vested balance is the amount of money in your 401(k) that belongs to you and cannot be taken back by an employer when you leave your job — even if you are fired.

The contributions you make to your 401(k) are automatically 100% vested. Vesting of employer contributions typically occurs according to a set timeframe known as a vesting schedule. When employer contributions to a 401(k) become vested, it means that the money is now entirely yours.

Having a fully vested 401(k) means that employer contributions will remain in your account when you leave the company. It also means that you can decide to roll over your balance to a new account, start making withdrawals, or take out a loan against the account, if your plan allows it. However, keeping a vested 401(k) invested and letting it grow over time may be one of the best ways to save for retirement.

How 401(k) Vesting Works

401(k) vesting refers to the process by which employees become entitled to keep the money that an employer may have contributed to their 401(k) account. Vesting schedules can vary, but most 401(k) plans have a vesting schedule that requires employees to stay with the company for a certain number of years before they are fully vested.

For example, an employer may have a vesting schedule requiring employees to stay with the company for five years before they are fully vested in their 401(k) account. If an employee were to leave the company before reaching that milestone, they could forfeit some or all of the employer-contributed money in the 401(k) account. The amount an employee gets to keep is the vested balance. Other qualified defined contribution plans, such as 401(a) plans or 403(b) plans, may also be subject to vesting schedules.

Recommended: What Happens to Your 401(k) When You Leave a Job?

Importance of 401(k) Vesting

401(k) vesting is important because it determines when an employee can keep the employer’s matching contributions to their retirement account. Vesting schedules can vary, but typically after an employee has been with a company for a certain number of years, they will be 100% vested in the employer’s contributions.

401(k) Vesting Eligibility

401(k) vesting eligibility is the time an employee must work for their employer before they are eligible to receive the employer’s contribution to their 401(k) retirement account. The vesting period varies depending on the employer’s plan.

401(k) Contributions Basics

Before understanding vesting, it’s important to know how 401(k) contributions work. A 401(k) is a tax-advantaged, employer-sponsored retirement plan that allows employees to contribute a portion of their salary each pay period, usually on a pre-tax basis.

For tax year 2025, employees can contribute up to $23,500, with an extra $7,500 in catch-up contributions allowed for those age 50 or older. For 2025, those aged 60 to 63 may contribute up to an additional $11,250 instead of $7,500, thanks to SECURE 2.0. In 2026, employees can contribute up to $24,500, with an extra $8,000 in catch-up contributions for those 50 or older. And again in 2026, those aged 60 to 63 may contribute up to an additional $11,250 SECURE 2.0 catch-up, instead of $8,000.

The Internal Revenue Service (IRS) also allows employers to contribute to their employees’ plans. Often these contributions come in the form of an employer 401(k) match. For example, an employer might offer matching contributions of 3% or 6% if an employee chooses to contribute 6% of their salary to the 401(k).

In 2025, the total contributions that an employee and employer can make to a 401(k) is $70,000 ($77,500 including standard catch-up contributions, and $81,250 with SECURE 2.0 catch-up for those aged 60 to 63). In 2026, the total contributions an employee and employer can make to a 401(k) is $72,000 ($80,000 including standard catch-up contributions, and $83,250 with SECURE 2.0 catch-up for those aged 60 to 63).

Employer contributions are a way for businesses to encourage employees to save for retirement. They’re also an important benefit that job seekers look for when searching for new jobs.

Recommended: How To Make Changes to Your 401(k) Contributions

Benefits of 401(k) Vesting

There are several benefits of 401(k) vesting, including motivating employees to stay with a company for the long term because they know they will eventually vest and be able to keep the money they have contributed to their 401(k). Additionally, it incentivizes employees to contribute to a 401(k) because they know they will eventually be fully vested and be entitled to all the money in their account.

401(k) vesting also gives employees a sense of security, knowing they will not lose the money they have put into their retirement savings if they leave their job.

Drawbacks of 401(k) Vesting

While 401(k) vesting benefits employees, there are also some drawbacks. For one, vesting can incentivize employees to stay with their current employer, even if they want to leave their job. Employees may be staying in a job they’re unhappy with just to wait for their 401(k) to be fully vested.

Also, using a 401(k) for investing can create unwanted tax liability and fees. When you withdraw money from a 401(k) before age 59 ½, you’ll typically have to pay a 10% early withdrawal penalty and taxes. This can eat into the money you were hoping to use for retirement.

How Do I Know if I Am Fully Vested in my 401(k)?

If you’re unsure whether or when you will be fully vested, you can check their plan’s vesting schedule, usually on your online benefits portal.

Immediate Vesting

Immediate vesting is the simplest form of vesting schedule. Employees own 100% of contributions right away.

Cliff Vesting

Under a cliff vesting schedule, employer contributions are typically fully vested after a certain period of time following a job’s start date, usually three years.

Graded Vesting

Graded vesting is a bit more complicated. A percentage of contributions vest throughout a set period, and employees gain gradual ownership of their funds. Eventually, they will own 100% of the money in their account.

For example, a hypothetical six-year graded vesting schedule might look like this:

What Happens If I Leave My Job Before I’m Fully Vested?

If you leave your job before being fully vested, you forfeit any unvested portion of their 401(k). The amount of money you’d lose depends on your vesting schedule, the amount of the contributions, and their performance. For example, if your employer uses cliff vesting after three years and you leave the company before then, you won’t receive any of the money your employer has contributed to their plan.

If, on the other hand, your employer uses a graded vesting schedule, you will receive any portion of the employer’s contributions that have vested by the time they leave. For example, if you are 20% vested each year over six years and leave the company shortly after year three, you’ll keep 40% of the employer’s contributions.

Other Common Types of Vesting

Aside from 401(k)s, employers may offer other forms of compensation that also follow vesting schedules, such as pensions and stock options. These tend to work slightly differently than vested contributions, but pensions and stock options may vest immediately or by following a cliff or graded vesting schedule.

Stock Option Vesting

Employee stock options give employees the right to buy company stock at a set price at a later date, regardless of the stock’s current value. The idea is that between the time an employee is hired and their stock options vest, the stock price will have risen. The employee can then buy and sell the stock to potentially make a profit.

Pension Vesting

With a pension plan, vesting schedules determine when employees are eligible to receive their full benefits.

How Do I Find Out More About Vesting?

There are a few ways to learn more about vesting and your 401(k) vested balance. This information typically appears in the 401(k) summary plan description or the annual benefits statement.

Generally, a company’s plan administrator or human resources department can also explain the vesting schedule in detail and pinpoint where you are in your vesting schedule. Understanding this information can help you know the actual value of your 401(k) account.

The Takeaway

While any employee contributions to 401(k) plans are immediately fully vested, the same is not always true of employer contributions. The employee may gain access to employer contributions slowly over time or all at once after the company has employed them for several years.

Understanding vesting and your 401(k)’s vesting schedule is one more piece of information that can help you plan for your financial future. A 401(k) and other retirement accounts like a traditional or Roth IRA can be essential components of a retirement savings plan. Knowing when you are fully vested in a 401(k) can help you understand how much money might be available when you retire.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

FAQ

What does 401(k) vesting mean?

401(k) vesting is when an employee becomes fully entitled to the employer’s matching contributions to the employee’s 401(k) account. Vesting typically occurs over a period of time, such as five years, and is often dependent on the employee remaining employed with the company.

What is the vesting period for a 401(k)?

The vesting period is the amount of time an employee must work for an employer before they are fully vested in the employer’s 401(k) plan. This period is different for each company, but generally, the vesting period is between three and five years.

How does 401(k) vesting work?

Vesting in a 401(k) plan means an employee has the right to keep the employer matching contributions made to their 401(k) account, even if they leave the company. Vesting schedules can vary, but most 401(k) plans have a vesting schedule of three to five years.

You may also be interested in:

What Happens to Your 401(k) When You Leave Your Job?

When Can You Withdraw From Your 401(k)?

Borrowing From Your 401(k): Pros and Cons