Tax deductions
Solo Service Business Tax Deductions: The Complete Checklist
Eight tax deductions every sole prop and single-member LLC should be claiming — with dollar values at $100k and $150k net profit. Home office, vehicle, Solo 401(k), QBI, and more.
Written by Matt Reese, CPA · 9 min read · Published April 2026·Share on LinkedIn
Key Takeaways
- Most solo service providers are missing 2–4 of these deductions, worth $3,000–$15,000/year in tax savings.
- None require an S-corp — they work for sole props, single-member LLCs, and S-corps equally.
- The SE tax deduction is the one most often missed by people who prepare their own returns.
- Solo 401(k) contributions reduce both income tax and SE tax base — the double benefit most people miss.
Jamie is a therapist in California. Gross revenue last year: $150,000. Filed as a sole prop. Saw the April bill, paid it, and is now wondering if they missed something.
They probably did. Not because they did anything wrong — but because eight deductions exist specifically for self-employed service providers, and most people are only claiming two or three of them. Self-employment tax (SE tax) is already 15.3% on top of income tax. Missing deductions on top of that compounds the hit.
None of the deductions below require an S-corp. They work for sole props, single-member LLCs, and S-corps equally. The S-corp is one lever — this list is a different one. Both matter.
See your estimated deduction gap in dollars
1. Home Office Deduction
If you have a space in your home used regularly and exclusivelyfor your business — and it’s your principal place of business — you can deduct it. The exclusive-use test is strict: a dedicated room used only for client calls and administrative work qualifies. A desk in your bedroom that you also use to watch TV does not.
Two calculation methods:
- Simplified method: $5 per square foot, up to 300 sq ft maximum — a $1,500 cap. No receipts required beyond knowing your square footage.
- Actual expense method: Calculate the percentage of your home used for business (office sq ft ÷ total sq ft), then apply that percentage to rent, mortgage interest, utilities, and repairs. More work, potentially larger deduction if your rent or mortgage is high.
Documentation: know your office square footage and total home square footage. Consistent method year to year is recommended (switching methods is allowed, but can raise questions).
The home office deduction is modest on the simplified method but meaningful under actual expenses if your rent or mortgage is substantial. It also unlocks the home-to-client-site mileage deduction — your home office makes your home your business location.
The exclusive-use test is strict
S-corp note: S-corp owners cannot deduct a home office on Schedule C (there is no Schedule C for an S-corp owner). The deduction must go through an Accountable Plan — the S-corp reimburses you for the business-use portion of your home expenses, and the corporation takes the deduction.
2. Vehicle Mileage
Every business mile driven is deductible at the IRS standard mileage rate — $0.70 per mile in 2026. This covers gas, maintenance, insurance, and a depreciation component all in one number. No receipts for individual gas fill-ups needed.
What counts as a business mile: client visits, driving to a meeting, supply runs for the business, trips to the post office to mail business documents. What doesn’t count: commuting from home to a regular office location (unless your home is your principal place of business via a qualifying home office).
Mileage log requirements:date, destination, business purpose, and miles driven. A log reconstructed from memory at tax time doesn’t hold up in an audit. Apps like MileIQ or Everlance auto-track trips via GPS; you swipe to categorize business vs. personal. Even a weekly spreadsheet updated in real time is far stronger than an annual estimate.
6,000 miles is roughly 2–3 client visits per week for 50 weeks. Many solo service providers underestimate their business mileage because they never tracked it. Start tracking now — you can't reconstruct last year.
No log, no deduction
3. Self-Employed Health Insurance
If you pay your own health, dental, or vision insurance premiums — and you’re not eligible for employer-sponsored coverage through a spouse’s job — those premiums are fully deductible. The deduction covers you, your spouse, dependents, and any child under age 27.
Where it goes: Schedule 1, Line 17 — not Schedule C. This is an above-the-line deduction, meaning it reduces your adjusted gross income (AGI), not just taxable income. A lower AGI affects your eligibility for other deductions and credits.
The deduction doesn't reduce SE tax — it's a personal return deduction, not a Schedule C deduction. But it does reduce your AGI, which can affect your QBI deduction calculation and other income-based thresholds.
Eligibility check: spouse employer coverage
S-corp interaction:S-corp owners must have their health insurance premiums run through W-2 wages (shown in Box 1 but not Boxes 3/4). The deduction is then taken on Schedule 1. This requires coordination with your payroll setup — premiums paid directly without the W-2 inclusion don’t qualify.
4. Solo 401(k) / SEP-IRA
Retirement contributions are one of the most powerful deductions available to self-employed people — and one of the most underused. The money goes directly off your taxable income, and it also reduces your SE tax base.
Solo 401(k) maximum (2026):
- Employee deferral: up to $23,500
- Employer contribution: 20% of net profit (after SE deduction), up to a combined limit of $72,000
- Total potential at $150k net profit: roughly $30,000–$35,000
SEP-IRA maximum:20% of net profit only (no employee deferral component) — lower ceiling at the same profit level. A SEP-IRA can be opened and funded up to the tax filing deadline including extensions, which is convenient. But the Solo 401(k)’s higher ceiling wins for most solo operators who can afford to save more.
December 31 deadline: A Solo 401(k) must be establishedby December 31 of the tax year. You can fund it after year-end (up to the filing deadline), but the account must be open before the calendar year closes. Miss this and you’re looking at a SEP-IRA or waiting for next year.
At $100k net profit, a maxed Solo 401(k) could reduce your taxable income by $42k — saving roughly $9,200 in federal income tax (22% bracket) plus SE tax savings on the employer contribution portion.
The SEP-IRA trap
Solo 401(k) contributions reduce your SE tax base, not just your income tax. That’s the double benefit most people miss — every dollar contributed saves money at two rates simultaneously.
5. QBI Deduction (§199A)
The Qualified Business Income (QBI) deduction is a 20% deduction on net business income, taken on your personal return — not on Schedule C. It was introduced by the Tax Cuts and Jobs Act of 2017 and applies to pass-through businesses: sole props, partnerships, S-corps, and single-member LLCs.
At its simplest: if your net profit is $100,000, you get a $20,000 deduction. This reduces your taxable income without affecting your SE tax base (because it’s a personal return deduction).
SSTB restrictions: Specified Service Trades or Businesses — including therapists, attorneys, financial advisors, and consultants — face phase-out thresholds. The deduction begins to phase out above $197,300 in taxable income (single) or $394,600 (married filing jointly) in 2026, and is fully eliminated $100,000 above those thresholds. Below these thresholds, SSTBs qualify for the full deduction. Personal trainers, designers, and most other service providers outside the SSTB list qualify at any income level.
The QBI deduction is automatic for most sole props below the income threshold — your tax software calculates it. The problem is assuming you don't qualify because you're a service business. Below the phase-out threshold, you do.
Common misconception: sole props don't qualify
| Business type | SSTB? | QBI below threshold? | QBI above threshold? |
|---|---|---|---|
| Personal trainer / fitness coach | No | Full 20% | Full 20% |
| Graphic designer / web designer | No | Full 20% | Full 20% |
| Photographer / videographer | No | Full 20% | Full 20% |
| Therapist / counselor | Yes (health) | Full 20% | Phases out |
| Attorney | Yes (law) | Full 20% | Phases out |
| Financial consultant | Yes (financial) | Full 20% | Phases out |
| Business management consultant | Yes (consulting) | Full 20% | Phases out |
6. SE Tax Deduction (Half of SE Tax)
Self-employed people can deduct half of their SE tax from adjusted gross income — because employees only pay half of FICA (their employer pays the other half). The IRS gives self-employed people an equivalent adjustment.
This deduction is automatic — any CPA or tax software that calculates Schedule SE will include it. It’s most often missed by self-preparers using basic free filing software that doesn’t fully support Schedule C, or by people who file with a Form 1040-EZ and skip Schedule SE entirely.
At $150k net profit, the SE tax deduction alone is worth $10,597 off your AGI — saving roughly $2,500 in federal income tax at the 24% rate. It doesn't feel like a deduction because it's automatic, but it's real money.
Most often missed by self-preparers
7. Phone & Internet
The business-use percentage of your phone and internet bill is deductible. For most solo service providers who use their personal phone for client calls, scheduling, and work communications, a 50–80% business-use allocation is reasonable and defensible.
Documentation: maintain a consistent percentage from year to year. You don’t need a formal call log, but having a rationale (e.g., “80% of calls are business-related; I use a separate personal phone for personal calls”) is helpful if questions arise.
Not a life-changing deduction on its own, but one that's easy to miss and easy to claim. If you have a separate business phone line or fiber internet primarily for work, those costs may support a higher percentage.
Don't deduct 100% of a personal phone
8. Professional Development
Courses, certifications, books, professional association dues, industry journal subscriptions, conferences, and online learning directly related to your current work are deductible. The key test: the expense must maintain or improve skills in your current work, not qualify you for a new career.
A therapist taking a continuing education course to maintain licensure: deductible. The same therapist taking a real estate licensing course: not deductible (different career). A personal trainer paying for a new certification in a modality they already teach: deductible. Paying for a law school application: not deductible.
Most solo service providers spend something on professional development and claim none of it. Subscriptions, books, dues, and conference fees all count. Go back through last year's credit card statements — there's likely more here than you think.
Don't exclude professional dues out of uncertainty
What an S-corp actually changes
The S-corp reduces SE tax on the profit portion above your salary — that’s the lever it pulls. These eight deductions reduce taxable incomebefore SE tax is even calculated. They’re different levers, and both matter.
Every deduction above applies whether you’re a sole prop, a single-member LLC, or an S-corp. The S-corp question is worth revisiting annually as your profit grows — but waiting until the math works doesn’t mean doing nothing. Claiming what’s already available to you is the right move at any income level.
See your deduction gap in dollars
Enter your income and situation — see which deductions you’re missing and what they’re worth at your profit level.
You might also read
The Home Office Deduction: Who Qualifies, How to Calculate It, and Which Method Saves More
Self-employed business owners can deduct the business-use portion of their home — but only if it meets the exclusive-use test. Simplified vs actual method, S-corp Accountable Plan, and what the IRS looks for.
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Two methods to deduct business vehicle use — standard mileage (70¢/mile in 2025) or actual expense. How to choose, what documentation is required, and the luxury car and SUV limits that change the math.
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The self-employed health insurance deduction reduces your adjusted gross income — not just your taxable income. Here's who qualifies, how to claim it correctly, and what's different for S-corp owners.
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The three main retirement plans for self-employed business owners compared — contribution limits, who qualifies, deadline rules, and when each one makes sense. With 2025 limits.
Tax deductionsThe QBI Deduction: How the 20% Pass-Through Deduction Works for Business Owners
Section 199A lets pass-through business owners deduct up to 20% of qualified business income. Who qualifies, what the income limits are, and how it interacts with S-corp structure.
Tax planningSelf-Employment Tax Explained: Rates, Calculation, and How to Reduce It
Self-employment tax is 15.3% on net profit — on top of income tax. How SE tax is calculated, what the deductible half actually saves, and the three ways to reduce it.
Frequently asked
Questions owners actually ask
- Does the home office deduction increase my audit risk?
- The home office deduction is legitimate and commonly taken — the IRS has never said it increases audit risk in isolation. What triggers scrutiny is an implausibly large deduction (claiming a 600 sq ft office in a 700 sq ft apartment) or a pattern of losses year after year. A defensible home office deduction with documentation — sq footage, exclusive use, and consistent method — is exactly what the deduction is designed for. Avoiding a legal deduction because of audit fear is not a good tax strategy.
- Can I use the standard mileage rate if I've already used actual expenses in a prior year?
- Not if you've claimed depreciation (MACRS, Section 179, or bonus depreciation) on that vehicle. Once you've taken accelerated depreciation under the actual expense method, you cannot switch to standard mileage for that vehicle. If you used the actual expense method without depreciation (e.g., just gas and insurance), you may be able to switch — but confirm with your CPA. For vehicles where you start with standard mileage, you can switch to actual in a later year.
- Does the self-employed health insurance deduction apply if my spouse has employer coverage available?
- No — this is an important limitation. If you or your spouse were eligible for employer-sponsored health coverage during any month of the year, you cannot take the self-employed health insurance deduction for that month. The deduction applies only to months when neither you nor your spouse had access to an employer plan. This is calculated month by month, so a partial-year disqualification is possible if your situation changed.
- Can I open a Solo 401(k) after December 31 for the prior tax year?
- No. A Solo 401(k) must be established (not just funded) by December 31 of the tax year you want to make contributions for. You can make the actual contributions after December 31 — up to the tax filing deadline including extensions — but the plan must be open before year end. A SEP-IRA, by contrast, can be opened and funded up to the filing deadline, including extensions. This is one case where the SEP-IRA's flexibility has an advantage, though the Solo 401(k)'s higher contribution ceiling usually wins.
- Does the QBI deduction apply to therapists or consultants?
- Possibly — with income-dependent restrictions. Therapists, attorneys, financial advisors, and consultants are classified as Specified Service Trades or Businesses (SSTBs). For SSTBs, the QBI deduction begins to phase out when taxable income exceeds $197,300 (single) or $394,600 (married filing jointly) in 2026, and is fully eliminated $100,000 above those thresholds. Below those thresholds, the full 20% QBI deduction is available even for SSTBs. Personal trainers and graphic designers generally do not fall under SSTB rules and can claim QBI at any income level.
- If I switch to an S-corp, do these deductions still apply?
- Most do, but the mechanics change. Vehicle deductions must go through an Accountable Plan (the S-corp reimburses you) rather than directly on Schedule C. Home office can't be claimed on Schedule C — it must also go through an Accountable Plan. Self-employed health insurance deductions are taken differently for S-corp owners (premiums run through W-2 wages, then deducted on Schedule 1). Retirement contributions work similarly. The QBI deduction still applies to S-corp distributions. The S-corp adds a layer of complexity to all of these, which is part of why the compliance cost is real — but the SE tax savings can still outweigh it at the right profit level.
Take the next step
Turn tax questions into a plan. Talk with Matt or see how we work with operating business owners.
Educational content only.This article is for informational purposes and does not constitute tax, legal, or investment advice. Every owner’s facts are different; consult a qualified CPA and advisor before acting. Tax and accounting services are provided through Matt Reese, CPA; investment advisory services are provided through Measured Risk Portfolios, a registered investment adviser. Matt Reese, CPA and Measured Risk Portfolios are separate entities; clients are not required to engage both.