What a freelancer can deduct, and what they still owe

Published 2026-10-15 · Last reviewed 2026-10-15

A 1099 arrives with nothing withheld, so the freelancer is the employer as well as the employee: the payroll tax an employer would pay on their behalf becomes their own bill. Two deductions soften that bill, and both are easy to claim incorrectly. This page takes one freelance year, applies the simplified home office method and the 2026 standard mileage rate, and shows what each is actually worth against the self-employment tax.

Two deductions that shrink the profit before the tax

The home office is priced the simple way: $5 per square foot for the business area, capped at 300 square feet, prorated for the part of the year the space was used. At 150 square feet for all 12 months that is $750. Mileage uses the two 2026 rates - 72.5 percentof a dollar a mile for the first half, 76.0 percent for the second - so 3000 miles early and 2000 miles late are worth $3,695. Together they are $4,445 of business expense, and the profit the tax is measured on drops from $90,000 to $85,555.

The self-employment tax is both halves of FICA

An employee and an employer each pay half of Social Security and Medicare. A sole proprietor pays both: 15.3 percent of net earnings, which is 12.4 percent Social Security and 2.9 percent Medicare. Only 92.35 percent of profit is treated as net earnings, because the employer half is not itself taxed. Half of the resulting tax is deductible against income, which is the quiet refund inside the bill - but the bill itself is real, and it is on top of the income tax.

What the two deductions are worth, in dollars

The deductions do not erase the self-employment tax, but they do move it. On $90,000 of profit the tax is $12,717; after the $4,445 of home office and mileage it is $12,089, a saving of $628. That saving is smaller than the deductions themselves because the tax is a rate on profit, not a dollar-for-dollar credit. What is left still shapes the rest of the return: $6,044 of it is deductible, the income tax on what remains is $5,872, and the whole federal bill is $17,961 - which is why four equal quarterly payments of about $4,490 are the number a freelancer should actually budget.

Where these numbers come from

• IRS Publication 587. The $5 per square foot rate, the 300square foot cap and the part-year proration are the simplified method the home office calculator uses, so the $750 here is the tool's own answer.
• IR-2025-128 and IR-2026-29. The 2026 standard mileage rate is two rates, not one: 72.5 percent a mile from January through June and 76.0 percent from July through December - the same two rates the mileage calculator uses.
• IRS Topic 554 and Schedule SE. The 15.3 percent rate, the 92.35 percent net-earnings factor, the $400 filing floor and the half-tax deduction are all part of the same self-employment tax calculation.

What this guide does not cover

It prices one profitable freelance year and two deductions. It does not model the actual-expense home office method or its carryover, vehicle depreciation, the qualified business income deduction's specified-service limits, self-employed health insurance, retirement contributions, or state income tax. It also assumes the $400 self-employment floor is already cleared and does not touch the additional Medicare tax above the higher thresholds. Whether a room qualifies as a home office at all is a facts-and-reasons test this page cannot run, and mileage needs a contemporaneous log, not a year-end guess.

Model your own freelance year in the Self-Employment Tax Calculator, price a room in the Home Office Deduction Calculator, or add up the business miles in the Mileage Deduction Calculator.

Estimates only - not financial, tax or legal advice, and it does not predict how the IRS will treat a particular return. Read the full disclaimer.