Four deductions worth real money, with the 2026 numbers

A deduction reduces taxable income, not tax. Which line of the return it lands on decides whether it also reduces the 15.3% self-employment tax, and for a freelancer that second question is usually worth more than the first.

These are US federal figures for tax year 2026, the return you file in early 2027. The UK structure is different and none of the numbers carry over, so there is a section near the end with the UK flat rates. This is general information, not advice on your return.

Where a deduction lands decides what it's worth

Self-employment tax is charged on 92.35% of net profit at 15.3%. Every dollar off Schedule C therefore removes 14.1 cents of SE tax before income tax is calculated at all. A dollar of above-the-line deduction on Schedule 1 removes none of it.

An illustration. Take $1,000 of deduction and a filer in the 22% bracket, which in 2026 starts at $50,400 of taxable income for a single filer. On Schedule C: $141 of SE tax, plus $204 of income tax on the remaining $929 once half the SE tax saving is added back. Around $345. The same $1,000 on Schedule 1 is worth $220 and nothing else.

Then subtract the clawback nobody mentions. If you claim the 20% qualified business income deduction, each dollar off Schedule C also shrinks QBI by a dollar, giving back a fifth of the income-tax saving. The $345 becomes roughly $300. Still 30 cents on the dollar, which is why the categories you record during the year need to match the lines you file on. Ledgers built for a bookkeeper rarely do, which is the argument behind a QuickBooks alternative built for freelancers and small studios.

The home office cap is $1,500, and it is rarely the binding limit

The simplified method is $5.00 per square foot up to 300 square feet, so $1,500 is the ceiling and measuring 340 buys you nothing. No Form 8829, no depreciation, no recapture on sale, and mortgage interest and property taxes stay whole on Schedule A. Two limits bite before the $1,500 does.

The first is exclusive use. Publication 587 is blunt: "You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes." A desk in a bedroom that is also a bedroom fails. A separately identifiable area used only for the business passes, and needs no partition or door. Use must also be regular, and for most freelancers the space is the principal place of business because no other fixed location hosts the admin.

The second is the gross income limitation, and it costs money quietly. The deduction cannot exceed gross income from the business use of the home less the business expenses unrelated to the home. In a year that roughly breaks even, that wipes the deduction out, and under the simplified method the excess is not carried forward. Under the regular method a disallowed amount does carry over, though you cannot use it in a year you switch to simplified. So: if net profit before the home-office line is comfortably positive, take the simplified method. If it is thin, run the regular method so the disallowed portion survives.

Health insurance is above the line, and one month of eligibility kills that month

The self-employed health insurance deduction goes on Schedule 1, computed on Form 7206. It covers medical, dental and qualifying long-term care premiums for you, your spouse, your dependents, and your children under 27.

The disqualifier is month by month, and it turns on eligibility rather than enrolment. No deduction for any month you were eligible to participate in a subsidised plan maintained by your employer, your spouse's employer, a dependent's employer, or the employer of a child under 27. Declining it does not help. Being offered it is enough.

The situation that catches people is ordinary: your spouse starts a job in March offering a subsidised family plan, and you stay on your own marketplace policy because you prefer it. March through December are gone. Two months of premiums, not twelve, and the software will not warn you, because it does not know about the job.

Two more constraints. The deduction is capped at net earnings from the specific trade or business under which the plan is established, so with two income streams and the policy attached to the smaller one, the cap is the smaller one. And it does not reduce self-employment tax. Form 7206's instructions say so directly: "You can't subtract the self-employed health insurance deduction when figuring net earnings for your self-employment tax."

Long-term care premiums count only up to a cap set by attained age at year end: for 2026, $500 at age 40 or under, $930 for 41 to 50, $1,860 for 51 to 60, $4,960 for 61 to 70 and $6,200 above 70.

Your retirement contribution base is about 20% of net earnings, not 25% of revenue

A SEP-IRA allows the lesser of 25% of compensation or $72,000 for 2026. Both halves of that sentence get misread.

"Compensation" for a self-employed person is neither revenue nor net profit. It is net earnings from self-employment reduced by the deductible half of SE tax and by the contribution itself. Because the contribution sits on both sides, the rate must be converted: Publication 560 carries a table turning a 25% plan rate into 0.200000 for the owner. Twenty per cent, on a base already smaller than your profit.

An illustration, not observed data. Net Schedule C profit of $100,000. Net earnings for SE tax are $92,350, and SE tax at 15.3% is $14,130, comfortably under the 2026 Social Security wage base of $184,500. Half of that, $7,065, comes off, giving plan compensation of $92,935. Twenty per cent is $18,587.

The two wrong numbers: 25% of $100,000 of profit is $25,000; 25% of $130,000 of revenue is $32,500. Both exceed the real limit, and an excess SEP contribution is a correction exercise rather than a rounding error.

A one-participant 401(k) changes the shape. You contribute as employee and employer: the deferral is $24,500 in 2026, and the employer piece uses the same effective 20%, capped in combination at $72,000.

The Solo 401(k) stays ahead until the $72,000 cap binds, at plan compensation of about $237,500; a SEP does not reach $72,000 until roughly $360,000. Catch-ups raise the combined cap to $80,000 at 50 and over and $83,250 between 60 and 63, per Notice 2025-67. The trade is administrative: a Solo 401(k) has a plan document and, once assets grow, a Form 5500-EZ. A SEP has neither.

The other difference is cash. An $18,587 contribution is a dated obligation competing with a quarterly estimated payment, so deciding in March whether you can afford it is a forecasting problem rather than a tax problem. A rolling forward view like 13 Weeks Out in Worklyn's CFO Mode answers that; the monthly tax set-aside calculator handles the estimated payment next to it.

Mileage is 72.5 cents, and the log is the deduction

The 2026 business standard mileage rate is 72.5 cents per mile, up from 70 cents in 2025. Six thousand business miles is $4,350 off Schedule C, worth roughly $1,300 at the rates above. Three things decide whether you keep it.

Commuting is not business mileage. A trip from home to a regular place of work is personal. The interaction with the first deduction in this post matters here: if your home office is your principal place of business, trips from it to a client site are business miles rather than commuting, which can convert a whole year of driving. Publication 463 is the authority on both points.

The standard rate is not an add-on. It includes a depreciation component, 35 cents of the 72.5 in 2026, so you cannot also deduct depreciation, lease payments, fuel, insurance or repairs. Parking and tolls sit outside it. If you own the car, the standard rate must be chosen in the first year it is available for business use, or you are locked into actual expenses for that vehicle.

Third, the log: date, mileage, destination or business purpose, and the business relationship where one applies, recorded at or near the time. A figure reconstructed in April from calendar entries is weaker evidence than a scruffy note written the same afternoon. That principle applies to every deduction here, and it is the subject of the record system that makes deductions survive scrutiny.

QBI survived, and it now has a floor

The Section 199A deduction was scheduled to expire after 2025. That sunset was repealed by Pub. L. 119-21 §70105(b)(1), signed 4 July 2025, so the deduction is permanent. Two changes came with it. The phase-in range widened to $75,000 for single filers and $150,000 for joint, softening the cliff for specified service businesses, the category most consultants fall into. And there is now a minimum deduction of $400 for anyone with at least $1,000 of aggregate active QBI. For 2026 the thresholds are $201,750 for most filers and $403,500 for joint filers, topping out at $276,750 and $553,500, per Rev. Proc. 2025-32. Below the threshold the service-business restriction does not apply.

Note the direction of travel: QBI is computed after the deductible half of SE tax, after the health insurance deduction and after the retirement contribution. Each of those shrinks the QBI base. That is the clawback from the first section, and it is why the honest value of a deduction is nearer 30 cents on the dollar than the sum of your marginal rates.

If you file in the UK, these are flat rates instead

None of the four numbers above apply. The UK equivalents run through simplified expenses, open to sole traders and partnerships without corporate partners, for vehicles, working from home and living at business premises.

Mileage moved this year. From 6 April 2026 the flat rate for cars and goods vehicles is 55p for the first 10,000 business miles, up from 45p, then 25p; motorcycles stay at 24p. The increase applies retrospectively from the start of the tax year, and once you use flat rates for a vehicle you must keep using them for that vehicle.

Working from home is £10 a month for 25 to 50 hours, £18 for 51 to 100 and £26 for 101 or more, and it excludes phone and internet, which you apportion separately. Everything else is governed by the wholly and exclusively test in section 34 ITTOIA 2005: a dual-purpose expense is disallowed outright, but a definite identifiable business proportion can be claimed, which is the basis on which HMRC accepts apportionment at all. UK deadlines and the Making Tax Digital quarterly updates that started on 6 April 2026 are covered in the year-round tax system post.

The check to run before the return goes out

Copy this. Every line marks a place the deduction gets lost rather than merely miscalculated.

2026 DEDUCTION CHECK

[ ] Home office: area measured, used ONLY for business, capped at 300 sq ft
[ ] Home office: net profit before this line is positive
-> simplified-method excess is lost, not carried forward
[ ] Health insurance: list every month you, your spouse, a dependent or a
child under 27 was ELIGIBLE for a subsidised employer plan
-> eligibility disqualifies the month even if the plan was declined
[ ] Health insurance: policy established under the business whose net
earnings you are claiming against
[ ] Retirement: base = net profit - half of SE tax, then 20%
-> not 25% of profit, and never 25% of revenue
[ ] Retirement: base under ~$237,500 -> a Solo 401(k) admits more
[ ] Mileage: date, miles, destination and purpose for every trip claimed
[ ] Mileage: commuting excluded, unless the home office is the
principal place of business
[ ] QBI: at least $1,000 of aggregate active QBI -> $400 minimum applies

What to change this week

Measure the home office in square feet and write the number down with the date. It is the only input to a $1,500 line and it takes four minutes.

Recompute your plan compensation from last year's profit at 20% rather than 25%, and decide whether the SEP you already have should become a Solo 401(k) before the next contribution.

List the months this year when anyone in your household became eligible for a subsidised employer plan, and put that list where your preparer will see it.

Worklyn's CFO Mode includes Safe to Spend and a rolling 13-week cash view, which is where a planned retirement contribution stops being a spreadsheet number and becomes a dated call on cash.