When you're a W-2 employee, your tax strategy is mostly passive: your employer withholds taxes, and you take the standard deduction. When you're self-employed, your tax strategy must be active. Every legitimate business expense you fail to track and deduct increases your taxable income, meaning you pay more in both income tax and self-employment tax.
Many solopreneurs rely on their CPA to find deductions at tax time. This is a mistake. A CPA can only deduct what you report to them. If you don't track the $15/month software subscription or the mileage to a client meeting, your CPA won't know it exists. This audit is designed to help you identify and categorize expenses you might be missing throughout the year.
$3,200+
Avg. Missed Deductions/Year
31%
Solopreneurs Who Track All Expenses
Home Office
Most Missed Category
The 'Ordinary and Necessary' Rule
Before diving into the checklist, understand the IRS's golden rule for business deductions: an expense must be both 'ordinary' and 'necessary' for your trade or business.
- Ordinary: Common and accepted in your industry. (e.g., A graphic designer buying Adobe Creative Cloud is ordinary; a freelance writer buying a commercial espresso machine is not.)
- Necessary: Helpful and appropriate for your trade or business. It doesn't have to be indispensable. (e.g., Taking a client to lunch to discuss a project is necessary; taking your best friend to lunch to complain about a client is not.)
If an expense meets both criteria, it's generally deductible. If it's a mixed-use expense (like your cell phone or home internet), you can only deduct the percentage used for business.
Important
The IRS Two-Part Test
Every deduction must pass two questions: (1) Is this expense ordinary for someone in my industry? (2) Is this expense necessary — helpful and appropriate — for my business? Both must be true. When in doubt, document your business reason in writing at the time of purchase.
Home Office & Utilities
If you use a portion of your home exclusively and regularly for business, you can deduct a portion of your home expenses. This is one of the most valuable, yet misunderstood, deductions.
- Rent or Mortgage Interest: Deductible based on the percentage of your home's square footage used for business.
- Utilities: Electricity, gas, water, and trash (percentage based).
- Home Internet: Deduct the percentage used for business. If you have a dedicated business line, deduct 100%.
- Cell Phone: Deduct the percentage of your bill used for business calls and data.
- Repairs and Maintenance: Direct repairs to the office space are 100% deductible; indirect repairs (like fixing the roof) are percentage-based.
Home Office Deduction Checklist
- ○Dedicated space used exclusively and regularly for work
- ○Measured square footage of office vs. total home
- ○Rent or mortgage interest receipts saved
- ○Utility bills (electric, gas, water) saved
- ○Internet bill — business percentage calculated
- ○Cell phone bill — business percentage calculated
- ○Repair/maintenance receipts saved and categorized
Software, Tech & Equipment
In the digital age, your tech stack is your storefront. Track every subscription and hardware purchase.
- Hardware: Laptops, monitors, keyboards, microphones, cameras, and external hard drives.
- Software Subscriptions: Adobe, Microsoft Office, Zoom, Slack, project management tools (Asana, Trello), CRM software, and accounting software (QuickBooks, FreshBooks).
- Web Hosting & Domains: Squarespace, Bluehost, GoDaddy, AWS.
- Cloud Storage: Google Drive, Dropbox, iCloud.
- Apps: Any app purchased specifically for business use.
Tech & Software Deduction Checklist
- ○Laptop, desktop, tablet (business use %)
- ○External monitors, keyboards, peripherals
- ○Microphone, camera, lighting (if used for work)
- ○All SaaS subscriptions logged in a spreadsheet
- ○Domain registrations and web hosting
- ○Cloud storage subscriptions
- ○Business-specific apps (not personal entertainment)
Marketing & Professional Services
You have to spend money to make money. These costs are fully deductible.
- Advertising: Facebook Ads, Google Ads, LinkedIn Ads, sponsored posts.
- Website Design & Maintenance: Paying a developer or designer to build or update your site.
- Professional Fees: Legal fees (contracts, LLC formation), accounting/CPA fees, bookkeeping services.
- Contractors: Anyone you pay via 1099 to help with your business (virtual assistants, freelance writers, editors).
- Networking & Memberships: Chamber of Commerce dues, professional association fees, networking group memberships.
Tip
The 1099 Contractor Rule
If you pay any contractor $600 or more in a calendar year, you must issue them a Form 1099-NEC by January 31st. Failing to do so doesn't disqualify the deduction, but it can trigger IRS scrutiny. Collect W-9 forms from all contractors before you pay them — not after.