Being your own boss is great, and one of the perks is getting to write off your business costs. These tax deductions lower the income you pay taxes on, which means more money stays in your pocket. Here are 5 deductions you should use for your 2025 taxes.
1. Business Mileage and Vehicle Expenses
If you use your car for work tasks—like driving to meet a client or running to the office supply store—the IRS allows you to deduct your car miles. The most straightforward and easiest way is using the Standard Mileage Rate.
- 2025 Rate: 70 cents per mile.
- Example: You drove 5,000 miles for your business over the year. 5,000 miles x $0.70 = $3,500 Deduction.
- Tip: Be sure to keep track of your miles with a simple log or an app. If you are nearing the end of the tax year and haven’t tracked our miles, look up the route on an online map tool (like Google Maps) between your office/home and the client’s address to get the exact mileage for each trip. Write down the date, destination, and mileage for each trip you confirm. If you have very consistent business driving, the IRS allows you to use a detailed log from a sample period to represent the entire year.
2. Qualified Business Income (QBI) Deduction
This is a special deduction that lets many self-employed people deduct up to 20% of your net business income (your profit after other deductions). This one can give big savings.
- Who Qualifies:
- You must be self-employed (a sole proprietor), in a partnership, or own an LLC or S-Corp. This is called a “pass-through” entity.
- The income must be earned in the U.S.
- How to be Sure You Qualify: The biggest limit is your total income and the type of job you do.
- If your total taxable income is below $197,300 (Single) or $394,600 (Married Filing Jointly) for 2025, you are generally good to claim the full 20% deduction, no matter what your job is.
- If your income is higher than these numbers, the deduction might be reduced or completely gone, especially if your job is in a “Specified Service” field like law, accounting, consulting, or health.
- Example: (If You Qualify): Your business made $50,000 in profit after all other deductions. 20% of $50,000 = $10,000 Deduction.
QBI Deduction calculations can get tricky but your Tax Expert will know what to do.
3. Home Office Deduction
If you have a space in your home that you use only for your business (like a separate room or office), you can deduct some of the cost of your home.
- Simplified Method: Deduct $5 per square foot of your dedicated workspace.
- Example: Your home office is 10 feet by 10 feet (100 square feet). 100 sq ft x $5 = $500 Deduction.
- Note: The maximum deduction under this method is $1,500.
4. Self-Employed Health Insurance Premiums
Since you pay for your own health insurance, the government lets you deduct those payments. This is a huge benefit if you are paying high premiums.
- The Deduction: You can deduct 100% of the premiums you pay for medical, dental, and vision insurance for yourself and your family.
- Example: You pay $600 per month for your family’s health insurance. $600 per month x 12 months = $7,200 Deduction.
5. Deducting Half of Self-Employment Tax
Because you are self-employed, you have to pay the full Social Security and Medicare taxes (the “self-employment tax”). The IRS gives you a break by letting you deduct the “employer” half of that payment from your income.
- Example: If your calculated self-employment tax for the year is $8,000. 1/2 of $8,000 = $4,000 Deduction.
Similar to the QBI Deduction, calculations for this one can get tricky so reach out to your Tax Expert to get more information.
Final Thought: These deductions are powerful tools, so good record-keeping is a must. Keep all your receipts and logs organized. If you have any complicated questions, a tax professional can always help make sure you’re getting every penny you deserve.
