Being self-employed can be a difficult and costly task. As a business owner, you’re responsible for all costs of your company as well as getting customers and generating income.

Luckily, the government has taken into account these hardships giving the self-employed certain tax deductions that can make their financial situation a little easier.

Self-Employment Tax Deductions

Everyone that works must pay into Medicare and Social Security. As a self-employer, you must pay into the employer portion of that tax. In 2015, the rate for employees was 7.65 percent while the rate for employers was 15.30 percent.

If you’re married, you must file jointly so the income number you’re using is your income plus that of your spouse’s. You do get to deduct half of your self-employment tax as a business expense. Also you only have to pay the self-employment tax on 92.35 percent of your net business income. Your net business income is what’s left after you subtract other businesses expenses.

Home Office Deduction

A home office is defined as any workplace used regularly and exclusively for business regardless of whether the room is rented or owned. These expenses are tax deductible as home office expenses. With these types of expenses, you’re basically on the honor system so you should be prepared to defend your deduction in case of an audit. A good way to prepare yourself for a potential audit is to prepare a specific map of your workplace with correct measurements.

Expenses that you can deduct under home office include business percentage of deductible mortgage interest, home depreciation, property taxes, utilities, homeowners insurance, and home maintenance. You are allowed to deduct what you use for your business so if your office occupies 15 percent of your home, you can deduct 15 percent from your annual electricity bill.

There are two ways to calculate your home office deductions, standard and simplified. The standard way is to calculate your actual home office expenses. The simplified way is to multiply the IRS-determined rate by your home office square footage. However, your home office can’t be larger than 300 square feet. So at $5 per square foot and with a maximum of 300 square feet, you can have a maximum deduction of $1,500.

Internet and Phone

You can deduct your business phone, fax, and Internet expenses whether you claim your home office as a deduction or not. The key is to only deduct expenses that are directly related to your business. If you have just one phone line, only deduct the percentage of the bill that is related to your business. However, if you have a second line, you can deduct the entire bill of that line. The same applies to the Internet, which will probably be between 25 percent and 50 percent.

Health Insurance Premiums

If your self-employed, pay your own health insurance premiums, and are not eligible to participate in a plan through your spouse’s employer, you can deduct all your health, dental, and any qualified long-term care insurance premiums. You can also deduct premiums paid to provide coverage for your spouse, dependents, and children that are under 27-years-old at the year’s end even if those children aren’t dependents.


Meals can be used as tax-deductible business expenses so long as you’re traveling for business or entertaining a client. These meals can’t be lavish or extravagant under the circumstances and you can only deduct 50 percent of the meal’s actual cost if you keep receipts. If you keep records of time, place, and business purpose in lieu of receipts, you can deduct 50 percent of the standard meal allowance.


The IRS has numerous restrictions on claiming business entertainment deductions. You must conduct business with the person you’re entertaining either during, immediately before, or immediately after the event. If you meet all of the IRS’ requirements, it’s a 50 percent deductible. Make sure to keep meticulous records of what business was conducted, when it was conducted, with who it was conducted, and how it directly relates to the entertainment expense in case you’re audited.


Meals and entertainment are often intertwined with business travel but they must last longer than an ordinary workday, require you sleep or rest, and take place away from the general area of your tax home. Also to be considered a business trip, you must engage in business activity like finding new customers, meeting clients, or learning new skills directly related to your business.

Make sure to keep detailed and accurate records with receipts for business travel expenses and activities because these types of deductions draw the attention of the IRS. You can deduct travel expenses like transportation to and from your destination, the cost of your transportation at the destination, lodging, and meals. The entirety of your business travel expenses are deductible except for meals and entertainment.

These are just seven deductions that you can deduct from your taxes as a self-employed business owner. Come into G.I. Tax to find out more ways to get the largest refund possible on your tax return.