Self-employed individuals, including sole proprietors, partners, and employees of small businesses, are generally eligible to establish and contribute to a SEP IRA. There are no age limits for contributing, and even if you have another retirement plan, you can still contribute to a SEP IRA. The employer (which can be the self-employed individual) must establish a written plan document, typically using IRS Form 5305-SEP, and contribute for all eligible employees who meet certain age and service requirements (e.g., age 21, worked 3 of the last 5 years, earned at least $750 in 2023, per IRC Section 408(k)).
Book a Free Call →To establish a SEP IRA, you typically use IRS Form 5305-SEP, Simplified Employee Pension - Individual Retirement Account Contribution Agreement, or a similar prototype document from a financial institution. This form outlines the plan's provisions and is not filed with the IRS, but rather kept for your records. You then open a SEP IRA account with a financial institution, such as a bank, mutual fund company, or brokerage firm, which will hold the contributions. Ensure the plan document specifies the contribution formula for all eligible employees, as required by IRC Section 408(k)(2)(B).
Book a Free Call →For 2023, the maximum contribution to a SEP IRA is the lesser of 25% of an employee's compensation (or net earnings from self-employment) or $66,000. For 2024, this limit increases to $69,000. These limits are subject to cost-of-living adjustments annually, as outlined in IRS Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). For self-employed individuals, compensation is generally net earnings from self-employment minus one-half of self-employment taxes and contributions for yourself.
Book a Free Call →Yes, contributions made to a SEP IRA are tax-deductible for the employer. For self-employed individuals, these contributions are deducted on Schedule C (Form 1040), Profit or Loss From Business, or Schedule F (Form 1040), Profit or Loss From Farming, as an adjustment to income. This deduction reduces your taxable income, as specified in IRC Section 404(h). The deduction is taken on your personal income tax return, Form 1040, line 15 for self-employed SEP contributions.
Book a Free Call →While you don't file Form 5305-SEP with the IRS, you will report your deductible SEP IRA contributions on your income tax return. For self-employed individuals, this is typically on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, line 15, after calculating the deductible amount on the 'Deductible Part of Self-Employment Tax' worksheet in IRS Publication 560. Employers with employees will report contributions on Form W-2 for their employees, though the employer's deduction is taken on their business tax return (e.g., Form 1120 for corporations).
Book a Free Call →Yes, you can contribute to a SEP IRA even if you also have a 401(k) plan, but the contribution limits are separate. The SEP IRA contribution limits apply to the employer contributions you make to the SEP. Your 401(k) contributions (both employee and employer) have their own distinct limits. This allows for significant retirement savings, as detailed in IRS Publication 560, which clarifies the interaction of various retirement plans.
Book a Free Call →You can make SEP IRA contributions for a given tax year up to the due date of your federal income tax return, including extensions. For most individuals, this is April 15th of the following year, or October 15th if you file an extension. This flexibility allows you to determine your net earnings from self-employment before making the contribution, as outlined in IRS Publication 560.
Book a Free Call →A common mistake is failing to contribute for all eligible employees, as SEP plans require non-discriminatory contributions for all qualifying employees, per IRC Section 408(k)(2)(B). Another error is miscalculating the maximum deductible contribution, especially for self-employed individuals who must adjust their net earnings. Also, ensure you establish the plan by the tax filing deadline (including extensions) for the year you want to deduct contributions.
Book a Free Call →Audit red flags for SEP IRA deductions often include unusually high contributions relative to reported income, especially for self-employed individuals, or inconsistent contributions for eligible employees. Failing to properly calculate net earnings from self-employment for the contribution limit can also trigger scrutiny. The IRS looks for compliance with the non-discrimination rules under IRC Section 408(k) and accurate calculation of the deduction per IRC Section 404(h).
Book a Free Call →A SEP IRA is separate from Traditional or Roth IRAs. Contributions to a SEP IRA do not affect your ability to contribute to a Traditional or Roth IRA, nor do they count towards the annual Traditional/Roth IRA contribution limits ($6,500 for 2023, $7,000 for 2024). However, having a SEP IRA may affect your ability to deduct Traditional IRA contributions if you are also covered by a retirement plan at work, as outlined in IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).
Book a Free Call →Yes, funds from a SEP IRA can generally be rolled over into another IRA (Traditional or Roth, subject to income limits for Roth conversions) or an eligible employer-sponsored retirement plan, such as a 401(k). This is a tax-free rollover, provided the rules for rollovers are followed, typically within 60 days of distribution, as per IRC Section 408(d)(3). This flexibility allows for consolidation or changes in retirement planning strategies.
Book a Free Call →SEP IRA contributions are always considered employer contributions, even when the self-employed individual contributes for themselves. This is a key distinction from other retirement plans. Because they are employer contributions, they are not subject to Social Security and Medicare taxes (FICA) for the employee, but the self-employed individual still pays self-employment tax on their net earnings before the SEP deduction, as clarified in IRS Publication 560.
Book a Free Call →Withdrawals from a SEP IRA are generally subject to the same rules as Traditional IRAs. Distributions before age 59½ are typically subject to a 10% early withdrawal penalty, in addition to being taxed as ordinary income, unless an exception applies (e.g., disability, first-time home purchase up to $10,000). Required Minimum Distributions (RMDs) generally begin at age 73 (or 75 for those turning 74 after 2032), as per IRC Section 401(a)(9) and IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).
Book a Free Call →Yes, a self-employed individual with no employees can establish and contribute to a SEP IRA for themselves. In this scenario, the self-employed individual is both the employer and the employee. This is a common and effective retirement savings strategy for sole proprietors and independent contractors, allowing them to take advantage of the higher contribution limits compared to a Traditional IRA.
Book a Free Call →For self-employed individuals, 'compensation' for SEP IRA contribution limit purposes is defined as your net earnings from self-employment, minus one-half of your self-employment tax, and further reduced by the deductible SEP IRA contribution itself. This requires a specific calculation, often referred to as the 'effective contribution rate,' to arrive at the correct deductible amount. IRS Publication 560 provides detailed worksheets for this calculation.
Book a Free Call →Yes, SEP IRAs are subject to strict non-discrimination rules under IRC Section 408(k). Contributions must bear a uniform relationship to compensation for all eligible employees. This means the percentage of compensation contributed must be the same for all participants, including the owner. You cannot contribute a higher percentage for yourself than for your employees, preventing discriminatory practices.
Book a Free Call →If you overcontribute to a SEP IRA, the excess contribution is not deductible and may be subject to a 6% excise tax each year it remains in the account, as outlined in IRC Section 4973. To avoid this penalty, you must remove the excess contribution, plus any attributable earnings, by the due date of your tax return (including extensions). Correcting overcontributions is crucial to avoid ongoing penalties.
Book a Free Call →While specific legislative changes are always subject to political processes, the SECURE Act 2.0 of 2022 introduced several provisions impacting retirement plans, though not directly altering the fundamental structure or contribution limits of SEP IRAs for 2026. Future legislation could potentially modify contribution limits, eligibility, or administrative requirements, but no concrete changes for 2026 are currently enacted that fundamentally alter SEP IRA mechanics. Taxpayers should monitor IRS announcements and legislative updates.
Book a Free Call →Yes, you can convert a SEP IRA to a Roth IRA. This is a taxable event, meaning the entire amount converted (excluding any non-deductible contributions, which are rare in SEP IRAs) will be included in your gross income for the year of conversion. There are no income limits for performing a Roth conversion, although the tax implications can be significant. This strategy allows for tax-free withdrawals in retirement, as detailed in IRS Publication 590-A.
Book a Free Call →A SEP IRA is simpler to administer than a Solo 401(k) but generally offers lower maximum contribution potential for high-income self-employed individuals. A Solo 401(k) allows for both employer contributions (similar to a SEP) and employee elective deferrals, potentially allowing for a higher total contribution ($69,000 + $23,000 employee deferral for 2024, plus catch-up). However, Solo 401(k)s have more administrative requirements, including potentially filing Form 5500-EZ once assets exceed $250,000, as outlined in IRS Publication 560.
Book a Free Call →Self-employed individuals have access to powerful retirement plans — Solo 401(k), SEP-IRA, SIMPLE IRA — with contribution limits far exceeding W-2 employee options.
Maximizing a Solo 401(k) at ~$70,000 in 2026 saves $25,900 at a 37% rate — the equivalent of a $25,900 tax refund.
Solo 401(k) allows the highest contributions for most self-employed individuals. SEP-IRA is simpler but limited to 25% of net earnings.
A UNK client earned $160,000 as a freelance videographer and had no retirement plan in place. Uncle Kam compared the options side by side: a SEP-IRA would allow $29,535 in contributions; a Solo 401(k) would allow $52,000 (employee deferral plus profit-sharing). The client chose the Solo 401(k), contributed the full $52,000, and saved $19,240 in federal taxes at his 37% marginal rate. He also elected a Roth contribution option within the Solo 401(k) to build tax-free growth alongside the pre-tax bucket.
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Be the Next Win — Book a CallSelf-employed individuals can choose from a SEP-IRA (up to 25% of net self-employment income, max $72,000 in 2026), a Solo 401(k) (up to ~$70,000 plus $7,500 catch-up if over 50), a SIMPLE IRA, or a Defined Benefit Plan (which can shelter $100,000+ annually for high earners). The Solo 401(k) is typically the best option for most self-employed individuals because it allows both employee deferrals and employer contributions.
In 2026, a Solo 401(k) allows up to $24,500 as an employee deferral (plus $7,500 catch-up if over 50) plus up to 25% of net self-employment income as an employer contribution, for a combined maximum of approximately $70,000 ($77,500 with catch-up). This is significantly higher than a SEP-IRA for most income levels.
Generally no — you cannot contribute to both a Solo 401(k) and a SEP-IRA for the same self-employment income in the same year. However, you can have a Solo 401(k) for your self-employment income and participate in an employer's 401(k) at a day job, though combined employee deferrals across all plans are capped at $24,500 in 2026.
You must establish a Solo 401(k) by December 31 of the tax year to make employee deferrals for that year. Employer profit-sharing contributions can be made up to the tax filing deadline (including extensions). A SEP-IRA, by contrast, can be established and funded up to the tax filing deadline.
No — retirement contributions reduce income tax but not self-employment tax. SE tax is calculated on net self-employment income before retirement contributions. However, the deduction for half of SE tax reduces your AGI, which in turn reduces the base on which retirement contribution limits are calculated.
Self-employed individuals can contribute both as employee ($24,500 in 2026, or $31,000 if 50+) and employer (up to 25% of compensation), for a combined maximum of approximately $70,000.
A self-employed consultant earning $200,000 contributes ~$70,000 to a Solo 401(k), reducing taxable income to $130,000 and saving $25,900 at a 37% rate.
Must establish the plan by December 31 of the tax year (contributions can be made until tax filing deadline). Roth Solo 401(k) allows tax-free growth.
A UNK client earned $180,000 as a freelance UX designer and was paying taxes on nearly all of it. Uncle Kam set up a Solo 401(k) and maximized contributions: $24,500 as the employee deferral plus $43,000 as the employer profit-sharing contribution (25% of net self-employment income) — totaling $67,500 in pre-tax contributions. At her 32% marginal rate, this saved $21,600 in federal taxes while building $67,500 in retirement wealth.
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Be the Next Win — Book a CallA Solo 401(k) is a retirement plan for self-employed individuals with no full-time employees other than a spouse. It allows contributions in two capacities: as an employee (up to $24,500 in 2026, plus $7,500 catch-up if 50+) and as an employer (up to 25% of net self-employment income), with a combined limit of approximately $70,000 in 2026.
The total Solo 401(k) contribution limit is approximately $70,000 in 2026 ($77,500 if age 50 or older). This includes up to $24,500 in employee deferrals plus employer profit-sharing contributions of up to 25% of net self-employment income (after the SE tax deduction).
A Solo 401(k) must be established by December 31 of the tax year for which you want to make contributions. Employee deferrals must also be made by December 31. Employer profit-sharing contributions can be made up to the tax filing deadline (including extensions).
Yes, but the employee deferral limit ($24,500 in 2026) applies across all 401(k) plans combined. If you contribute $24,500 to your employer's 401(k), you cannot make additional employee deferrals to your Solo 401(k). However, you can still make employer profit-sharing contributions to the Solo 401(k).
A Solo 401(k) generally allows higher contributions for most self-employed individuals because it includes both employee deferrals and employer contributions. A SEP-IRA is limited to 25% of net self-employment income (no employee deferral component). For someone earning $100,000 net, a Solo 401(k) allows $46,000 vs. $18,587 for a SEP-IRA.
To report a backdoor Roth IRA conversion, you'll primarily need to file IRS Form 8606, Nondeductible IRAs. This form tracks your non-deductible contributions to traditional IRAs and the subsequent conversion to a Roth IRA, ensuring that only the earnings (if any) are taxed. You will also receive Form 1099-R from your IRA custodian reporting the distribution from the traditional IRA and Form 5498 showing the Roth IRA contribution. Accurate reporting on Form 8606 is crucial to avoid being double-taxed on your non-deductible contributions when you eventually withdraw funds from the Roth IRA.
The primary tax implication of a Mega Backdoor Roth conversion is that the conversion itself is generally tax-free, provided you are converting after-tax 401(k) contributions. This is because these contributions have already been taxed. Any earnings on the after-tax contributions, however, would be taxable upon conversion to a Roth account. For 2026, the IRS still allows these conversions under current tax law, specifically leveraging the provisions of IRC Section 402(a) for after-tax contributions and IRC Section 408A for Roth accounts. It's crucial to ensure your plan allows in-service distributions of after-tax funds to avoid any unexpected tax liabilities on earnings.
No, there are no income limitations for utilizing the Mega Backdoor Roth strategy itself, which is one of its significant advantages. Unlike direct Roth IRA contributions, which have income phase-out limits (e.g., $161,000 for single filers and $240,000 for married filing jointly in 2024, subject to inflation adjustments for 2026), the Mega Backdoor Roth leverages your 401(k) plan. The ability to make after-tax contributions and then convert them to a Roth account is independent of your adjusted gross income. This makes it a powerful tool for high-income earners to contribute substantial amounts to a Roth account, bypassing the standard Roth IRA income restrictions under IRC Section 408A(c)(3).
Distributions from an HSA for qualified medical expenses are tax-free, completing the 'triple tax advantage' by avoiding taxes on contributions, growth, and withdrawals. This is outlined in IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. For 2026, there are no income limitations on who can take tax-free distributions for qualified medical expenses, making it a powerful tool for healthcare cost management. It's crucial to retain receipts to substantiate these expenses in case of an IRS audit, as non-qualified distributions are subject to income tax and a 20% penalty if taken before age 65, per IRC Section 223(f)(4).
No, once you are enrolled in Medicare (Part A or Part B), you are no longer eligible to contribute to an HSA and therefore cannot fully utilize the HSA Triple Tax Advantage for new contributions. This is because Medicare is considered 'other health coverage' that disqualifies you from being an eligible individual for HSA purposes, as per IRC Section 223(c)(1)(A)(ii). However, you can still take tax-free distributions from your existing HSA balance for qualified medical expenses, including Medicare premiums (excluding Medigap), after enrollment. It's important to stop contributions the month you enroll in Medicare to avoid penalties.
Yes, you can make a SEP-IRA contribution even if you have employees, but if you do, you must contribute a uniform percentage of compensation for all eligible employees. This means you cannot contribute a higher percentage for yourself than for your employees. The contribution rules are outlined in IRS Publication 560, Retirement Plans for Small Business. This requirement ensures that SEP-IRAs benefit all eligible employees, not just the business owner.
Yes, SEP-IRA contributions made by a business owner for themselves are tax-deductible as a business expense. This deduction reduces the business's taxable income. For 2026, the maximum deductible contribution is limited to the lesser of 25% of the employee's compensation (up to the annual compensation limit of $345,000) or $69,000. This deduction is reported on Schedule C (Form 1040) for sole proprietors or on the appropriate business tax form for other entity types, as detailed in IRS Publication 560.
Gig delivery drivers can deduct all supplies and equipment used in their delivery business. This includes insulated delivery bags, hot bags, cold bags, phone mounts, car chargers, power banks, flashlights, and any other gear used to complete deliveries. These are small but real deductions that add up over a year of full-time delivery work.
A DoorDash driver spending $400/year on insulated bags, phone mounts, and car accessories deducts the full amount, saving $120–$160 in taxes.
Stack this deduction with the mileage deduction, phone deduction, and self-employment tax deduction for maximum savings. Keep all receipts from Amazon or delivery supply stores.
If you rent a separate studio space for your creative work, the full cost of rent, utilities, and equipment for that space is deductible. If you use a dedicated room in your home exclusively as a studio, it qualifies for the home office deduction. This applies to photography studios, podcast recording studios, video production spaces, and any other dedicated creative workspace.
A photographer renting a studio for $1,500/month deducts $18,000/year in rent, saving $5,400–$7,200 in taxes.
A home studio used exclusively for client work qualifies for the home office deduction even if you also have an office elsewhere — the exclusive use test is what matters.
Self-employed individuals can deduct 50% of the self-employment tax they pay (the employer-equivalent portion) as an above-the-line deduction, reducing adjusted gross income.
A freelancer with $100,000 in net SE income pays $14,130 in SE tax. The 50% deduction ($7,065) saves $2,614 at a 37% rate.
This deduction is automatic — it appears on Schedule 1 of Form 1040. Ensure your tax software is calculating it correctly.
A UNK client was a freelance software developer earning $120,000 in net self-employment income. He had been filing his own taxes and had missed the SE tax deduction for two years. Uncle Kam identified the issue: the IRS allows self-employed individuals to deduct 50% of their self-employment tax as an above-the-line deduction. On $120,000 in net income, the SE tax was $16,955 — and the deduction was $8,478. At his 24% rate, this saved $2,034/year — and he recovered $4,068 by amending two prior returns.
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Be the Next Win — Book a CallSelf-employed individuals pay 15.3% self-employment tax (covering Social Security and Medicare) on net self-employment income. The IRS allows you to deduct 50% of the SE tax paid as an above-the-line deduction on Schedule 1 of your Form 1040. This deduction reduces your adjusted gross income and is available regardless of whether you itemize.
The deduction equals 50% of your total SE tax. For someone with $100,000 in net SE income, the SE tax is approximately $14,130, and the deduction is $7,065. At a 24% marginal rate, this saves $1,696 in income taxes — on top of the SE tax already paid.
No. The SE tax deduction is an above-the-line deduction, meaning it reduces your adjusted gross income (AGI) regardless of whether you take the standard deduction or itemize. It is one of the most straightforward and universally available deductions for self-employed individuals.
The most effective way to reduce SE tax is to elect S-Corp status. As an S-Corp, you pay SE tax (payroll taxes) only on your reasonable salary — not on the full profit. Distributions above the salary are not subject to SE tax. For someone earning $150,000+ net, this can save $10,000–$20,000/year.
No. They are separate deductions. The SE tax deduction (50% of SE tax paid) reduces your AGI. The QBI deduction (up to 23% of qualified business income under the OBBBA) is a separate below-the-line deduction that reduces taxable income. Both are available to self-employed individuals and can be claimed simultaneously.
Self-employed individuals can deduct 100% of health insurance premiums paid for themselves, their spouse, and dependents as an above-the-line deduction.
Paying $18,000/year in family health insurance premiums deducts the full amount, saving $6,660 at a 37% rate.
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High-income earners above the Roth IRA income limit (approximately $165,000 single / $246,000 MFJ in 2026) can make a non-deductible traditional IRA contribution and immediately convert it to a Roth IRA.
Contributing $7,000/year to a backdoor Roth starting at age 40 grows to $560,000+ tax-free by retirement at 7% annual return.
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Deduct business vehicle expenses using the standard mileage rate or actual expenses (depreciation, gas, insurance, repairs). Section 179 and 100% bonus depreciation allow full expensing of heavy SUVs and trucks in Year 1.
Driving 20,000 business miles at 72.5¢/mile = $14,500 deduction. A $80,000 SUV over 6,000 lbs can be fully expensed under 100% bonus depreciation, saving $29,600 at 37%.
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If you rent a booth, chair, or suite in a salon or barbershop, your rental fees are fully deductible as a business expense. This is typically the largest deduction for booth renters — most pay $200–$600/week in booth rent, adding up to $10,400–$31,200/year in fully deductible expenses.
A hair stylist paying $350/week in booth rent deducts $18,200/year, saving $5,460–$7,280 in taxes.
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Deduct a portion of your home expenses (mortgage interest, rent, utilities, insurance, depreciation) based on the percentage of your home used exclusively and regularly for business.
A 200 sq ft office in a 2,000 sq ft home = 10% allocation. $30,000 in home expenses × 10% = $3,000 deduction, saving $1,110 at a 37% rate.
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Health Savings Accounts offer a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. The OBBBA also expanded HSA eligibility to include bronze and catastrophic plans starting 2026.
Contributing $8,750 (family) to an HSA in 2026 saves $3,237 in taxes at a 37% rate. Investing the balance for 20 years at 7% grows to $33,800+ tax-free.
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Your home internet bill is deductible to the extent it is used for business. For most self-employed professionals who work from home, this is 50–100% of the monthly cost. A dedicated business internet line is 100% deductible.
A self-employed consultant paying $80/month for internet and using it 80% for business deducts $768/year, saving $230–$307 in taxes.
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If you use your cell phone for business, you can deduct the business-use percentage of your monthly bill, data plan, and the cost of the device itself. For most self-employed professionals, this is 80–100% of the total cost.
A freelancer paying $120/month for their phone and using it 90% for business deducts $1,296/year, saving $389–$518 depending on tax bracket.
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Small businesses with 100 or fewer employees receive a tax credit of up to $5,000 per year for 3 years for the costs of starting a new retirement plan, plus an additional credit for employer contributions.
A 10-person company starting a 401(k) receives $5,000/year for 3 years = $15,000 in direct tax credits, covering most of the setup and administration costs.
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Pass-through business owners (sole props, partnerships, S-Corps, LLCs) can deduct up to 23% of qualified business income starting in 2026, permanently under the OBBBA. The deduction reduces effective tax rates significantly.
A consultant earning $200,000 in QBI deducts $46,000 (23%), saving $17,020 at a 37% rate — $2,220 more than under the old 20% rule.
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Deduct education expenses that maintain or improve skills required in your current trade or business, including courses, books, subscriptions, and professional conferences.
Spending $5,000 on courses, conferences, and books deducts the full amount, saving $1,850 at a 37% rate.
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Personal trainers and fitness professionals can deduct the cost of equipment and supplies used in their business. This includes resistance bands, foam rollers, kettlebells, dumbbells, mats, stopwatches, heart rate monitors, fitness apps, and any other tools used with clients. Certification renewal fees (NASM, ACE, NSCA, ACSM) and continuing education are also fully deductible.
A personal trainer spending $2,500/year on equipment, certification renewals, and liability insurance deducts the full amount, saving $750–$1,000.
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Photographers, videographers, and content creators can deduct the full cost of cameras, lenses, tripods, lighting equipment, microphones, audio recorders, drones, gimbals, memory cards, hard drives, and any other production equipment used in their business. Under Section 179, the full cost can be expensed in Year 1 instead of depreciated over 5 years.
A photographer purchasing a $3,500 camera body and $1,200 in lenses expenses the full $4,700 under Section 179, saving $1,410–$1,880 in taxes.
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Computers, laptops, tablets, monitors, keyboards, mice, external hard drives, and other hardware used in your business are fully deductible. Under Section 179, you can expense the full cost in Year 1 instead of depreciating over 5 years. For mixed business/personal use, only the business-use percentage is deductible.
A freelance software engineer purchasing a $2,500 laptop used 95% for work expenses $2,375 under Section 179, saving $713–$950 in taxes.
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If you rent a coworking space, shared office, or dedicated office for your business, the full cost is deductible. This includes WeWork, Regus, local coworking memberships, and any other office rental. Monthly membership fees, day passes, and dedicated desk or private office costs all qualify.
A freelancer paying $400/month for a coworking membership deducts $4,800/year, saving $1,440–$1,920 in taxes.
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Deduct ordinary and necessary travel expenses when traveling away from home for business, including transportation, lodging, and 50% of meals.
A business owner spending $15,000/year on travel (flights, hotels, meals) deducts $13,500 (meals at 50%), saving $4,995 at a 37% rate.
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Any supplies you purchase and use in your business are fully deductible in the year purchased. This includes paper, pens, printer ink and toner, folders, binders, postage, envelopes, labels, staples, tape, and any other consumable materials used in your work.
A small business owner spending $1,200/year on office supplies saves $360–$480 in taxes depending on their bracket.
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If you are required to hold a professional license to practice your trade, the cost of obtaining and renewing that license is fully deductible as a business expense. This includes state bar fees for attorneys, medical license renewals, nursing licenses, contractor licenses, real estate licenses, CPA licenses, and any other required professional credentials.
A physician paying $2,500/year in state medical license fees, DEA registration, and board certification renewals saves $750–$1,000 in taxes.
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Continuing education required to maintain your professional license or improve skills in your current trade is fully deductible. This includes CME credits for physicians, CLE credits for attorneys, CPE credits for CPAs, CE credits for nurses, real estate CE, and any other mandatory or voluntary professional development directly related to your current work.
A CPA spending $3,000/year on CPE courses, webinars, and AICPA membership saves $900–$1,200 in taxes.
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Any software subscription or SaaS tool you pay for and use in your business is fully deductible in the year paid. This includes accounting software (QuickBooks, FreshBooks), design tools (Adobe Creative Cloud, Figma, Canva), communication tools (Zoom, Slack, Microsoft 365), project management tools (Asana, Monday.com), and any other business application.
A freelance designer paying $600/year for Adobe Creative Cloud, $150 for Figma, and $200 for project management tools deducts $950/year, saving $285–$380.
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All fees associated with your business bank account and payment processing are fully deductible. This includes monthly account maintenance fees, wire transfer fees, Stripe processing fees (typically 2.9% + 30¢), PayPal fees, Square fees, and any other merchant processing costs. For businesses processing significant revenue, these fees add up to thousands per year.
An ecommerce seller processing $200,000/year through Stripe pays approximately $5,830 in fees — fully deductible, saving $1,749–$2,332 in taxes.
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All costs of advertising and promoting your business are fully deductible. This includes Google Ads, Facebook and Instagram ads, business cards, flyers, brochures, signage, website design and hosting, domain names, email marketing tools (Mailchimp, Klaviyo), and any other promotional expenses.
A real estate agent spending $8,000/year on Facebook ads, business cards, and listing photography deducts the full amount, saving $2,400–$3,200 in taxes.
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The cost of accounting, bookkeeping, and tax preparation for your business is fully deductible. This includes CPA fees for tax preparation and planning, bookkeeper fees, payroll service costs (Gusto, ADP, Paychex), accounting software (QuickBooks, Xero), and any other professional fees related to managing your business finances.
A self-employed consultant paying $3,500/year for CPA services, bookkeeping, and QuickBooks deducts the full amount, saving $1,050–$1,400 in taxes.
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Legal fees paid for business purposes are fully deductible. This includes attorney fees for drafting contracts, reviewing leases, employment matters, business disputes, entity formation (LLC, S-Corp), intellectual property protection, and any other legal services directly related to your business operations.
A business owner paying $4,000/year in attorney fees for contracts and business matters deducts the full amount, saving $1,200–$1,600 in taxes.
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Protective clothing and safety equipment required for your trade or job site is fully deductible. This includes steel-toed work boots, hard hats, safety glasses, hearing protection, gloves, high-visibility vests, respirators, and any other OSHA-required or job-required safety gear. The key test: the gear must be required for the job and not suitable for everyday wear.
A contractor spending $600/year on work boots, gloves, safety glasses, and hard hats deducts the full amount, saving $180–$240 in taxes.
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S-Corp shareholders pay payroll taxes only on their "reasonable salary," not on all business profits. Distributions above the salary avoid 15.3% self-employment tax.
A business earning $300,000 net. Salary set at $80,000 (reasonable). Distributions: $220,000. SE tax savings: $220,000 × 15.3% = $33,660/year.
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Deduct 50% of the cost of business meals where there is a genuine business discussion. The meal must not be lavish, and the business purpose must be documented.
Spending $20,000/year on business meals = $10,000 deduction, saving $3,700 at a 37% rate.
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Work clothing that is required as a condition of employment and not suitable for everyday wear is fully deductible. For healthcare professionals, this includes scrubs, lab coats, surgical gowns, nursing shoes, compression socks worn for work, and any other required clinical attire. The clothing must be required by your employer or profession and not adaptable to everyday use.
A travel nurse spending $800/year on scrubs, compression socks, and nursing shoes deducts the full amount, saving $240–$320 in taxes.
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Healthcare professionals can deduct the cost of medical supplies and clinical equipment used in their practice. This includes stethoscopes, blood pressure cuffs, otoscopes, diagnostic tools, syringes, gloves, masks, bandages, and any other consumable or durable medical supplies used in patient care. Larger equipment qualifies for Section 179 immediate expensing.
A self-employed nurse practitioner spending $2,000/year on clinical supplies, a new stethoscope, and diagnostic tools deducts the full amount, saving $600–$800.
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Professional liability insurance (malpractice insurance) premiums are fully deductible as a business expense. This applies to all licensed professionals including physicians, dentists, nurses, attorneys, financial advisors, CPAs, architects, and any other professional who carries liability coverage for their practice.
A physician paying $8,000/year in malpractice insurance premiums deducts the full amount, saving $2,400–$3,200 in taxes.
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Tradespeople and contractors can deduct the full cost of tools and equipment used in their business. Small tools (under $2,500) are expensed immediately. Larger equipment qualifies for Section 179 immediate expensing or 100% bonus depreciation. This includes hand tools, power tools, ladders, scaffolding, safety gear, hard hats, work boots, and any other equipment used on the job.
A general contractor spending $5,000/year on tools, safety equipment, and work gear deducts the full amount, saving $1,500–$2,000 in taxes.
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Every business expense for your side hustle reduces both income tax AND self-employment tax — a $1,000 deduction saves approximately $350 in combined taxes at the 22% bracket.
A SEP-IRA lets you contribute up to 25% of your net side hustle income — open and fund it by October 15 (with extension) for the prior tax year.
Increase your W-4 withholding at your day job to cover side hustle taxes — no quarterly payment deadlines, no underpayment penalties.
This write-off is commonly used by the following taxpayer profiles. Click to see all strategies for your situation.
Get answers to the most frequently asked tax questions for your profession.
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