Schedule C Deductions: The Freelancer's Yes, Partly and Nice-Try List

By Tom, CPA · Updated October 27, 2026

Part of: Tax Planning

TL;DR: Schedule C deductions must be ordinary, necessary and documented. The big ones are home office, vehicle mileage, equipment, software and insurance. Health insurance and retirement contributions go on Schedule 1, not Schedule C.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

A freelancer's tax return is a monument to two emotions: hope ("surely my Netflix subscription is research") and fear ("what if the IRS sees my receipts shoebox"). The tax code is 4 million words long; you need about 400 of them to sort Schedule C deductions into "yes," "partly" and "nice try."

The rule behind every item below: a business expense must be ordinary and necessary for your trade or business (IRC Section 162), and you must be able to prove it. This checklist covers the big categories for sole proprietors and single-member LLCs filing Schedule C, with 2026 figures as of Oct 2026.

CPA Warning Label: Mixed personal and business items need a defensible business-use percentage. Without records, a deduction is just a wish.

Home office

If part of your home is used regularly and exclusively as your principal place of business, you can deduct it. Two methods: the simplified method at $5 per square foot up to 300 square feet (maximum $1,500), or actual expenses allocated by business-use percentage on Form 8829. A guest room that doubles as an office fails the exclusive-use test. Full details in our home office deduction guide.

Vehicle

Business driving can be deducted using the standard mileage rate or actual expenses. For 2026 the IRS business rate is 72.5 cents per mile for January 1 through June 30 and 76 cents per mile from July 1 through December 31, after a mid-year increase. Commuting from home to a regular workplace is never deductible. You need a log with dates, miles, destinations and purpose. Our mileage vs actual expenses comparison explains which method wins.

Equipment and software

• Computers, cameras, tools, furniture: deductible through depreciation, Section 179 expensing, or bonus depreciation. For 2026 the Section 179 limit is $2,560,000, per Rev. Proc. 2025-32, far above what most freelancers buy.
• De minimis safe harbor: items costing $2,500 or less per invoice or item can be expensed immediately if you make the annual election. See our de minimis safe harbor guide.
• Software and subscriptions: accounting, design, cloud storage and project tools used for the business.
• Phone and internet: the business-use percentage. A personal line used 30% for work is 30% deductible, not 100%.

Health insurance

Self-employed people with net profit can usually deduct health, dental and qualified long-term care premiums for themselves, a spouse and dependents as an adjustment to income, not on Schedule C. It does not reduce self-employment tax, and you cannot take it for months you were eligible for a subsidized employer plan, including a spouse's. Details in our self-employed health insurance deduction guide.

Retirement contributions

SEP IRAs and solo 401(k)s let you shelter a large share of profit. For 2026 the 401(k) employee deferral limit is $24,500, per the IRS. Like health insurance, your own contributions are taken on Schedule 1, not Schedule C, so they reduce income tax but not self-employment tax. Contributions made for employees are business expenses on Schedule C.

Other common deductions

• Professional services: tax preparation for the business portion, legal fees, bookkeeping.
• Business insurance: general liability, professional liability, cyber policies.
• Advertising and marketing: websites, hosting, ads, business cards.
• Business travel: transportation, lodging and 50% of meals when traveling away from your tax home overnight for business.
• Business meals: generally 50% deductible when a business associate is present and the meal is not lavish. Entertainment, like concert tickets, is not deductible.
• Education: courses that maintain or improve skills in your current business. Training for a new career does not count.
• Contract labor: payments to freelancers you hire. You may need to file Form 1099-NEC.
• Bank and payment processing fees, licenses, dues and supplies.
• Startup costs: up to $5,000 deductible in the first year, reduced dollar-for-dollar once total startup costs pass $50,000, with the rest amortized over 15 years.

Nondeductibles and the 'nice try' list

• Commuting from home to a regular office.
• Personal clothing you could wear outside work, even if you only wear it to meetings.
• Your own labor. Sole proprietors cannot deduct a "salary" to themselves.
• Fines and penalties paid to governments.
• Political contributions and lobbying.
• Gym memberships, even if "being healthy helps me work."
• Federal income tax and your own self-employment tax (other than the separate half-SE adjustment).
• Personal portions of mixed-use items. The IRS has seen the "my dog is head of security" argument.

Landlords have a different list; see rental property deductions and Schedule E line by line. Short-term rental hosts should read Schedule C vs E for STRs.

Record-keeping that survives an audit

Open a separate business checking account and card, even for a tiny side gig. Mixed accounts turn every transaction into an argument. Snap a photo of receipts when you get them, use an app or spreadsheet for mileage, and write the business purpose on meal and travel receipts while you still remember who was at lunch. Keep records at least three years after filing, longer for assets you depreciate; our record retention guide has the full schedule.

Illustration

Alex, a freelance photographer, grossed $85,000 in 2026. Expenses: a $3,200 camera body (too pricey for the $2,500 de minimis election, so Alex expenses it under Section 179), $1,500 simplified home office, 4,000 business miles split evenly across both halves of the year (2,000 × $0.725 + 2,000 × $0.76 = $2,970), $1,800 software, $1,200 insurance, $2,000 of contract editing and $900 in 50%-deductible travel meals ($450 deductible). Total Schedule C expenses: $13,120. Net profit: $71,880. At roughly 14.1% SE tax plus a 22% bracket, those deductions saved Alex around $4,700 combined, before state tax. Illustrative only. Note that the deductions also lower the half-SE adjustment slightly, which is why real software results never match back-of-envelope math to the dollar.