The Codex

Freelance tax deductions: business expenses you can claim in the US, UK, Canada, and Australia

Deduct the business share of what it costs to run your freelance business, keep the records, and know the 2026 rates for home office, mileage, and equipment in your country.

Freelancers can deduct the costs of running their business: software, equipment, a share of home, phone and internet costs, business travel, professional fees, insurance and training. In the US an expense must be ordinary and necessary for your work; in the UK, Canada and Australia the idea is the same under different names. You can only deduct the business share of anything you also use personally, and you need a record for every claim.

This guide covers the deductions that move the numbers most (home office, vehicle, equipment, health insurance and retirement), with 2026 figures from the IRS, HMRC, the CRA and the ATO, a worked example and the record-keeping rules for each country.

Disclaimer: General information for the US, UK, Canada and Australia, reviewed November 4, 2026. It is not tax advice. Check your situation with a qualified tax professional.

Codex summary

You can deduct the business share of costs that are ordinary and necessary for your freelance work: software, equipment, home office, phone and internet, travel, professional fees, insurance, and training. In the US, also claim half of self-employment tax, self-employed health insurance, retirement contributions, and the QBI deduction outside Schedule C. Split mixed-use costs, keep records, and remember a deduction saves a fraction of what you spend.

Who this is for

Freelancers and sole traders in the US, UK, Canada, or Australia who want to know which expenses they can claim, which method gives the bigger home office or vehicle deduction, and what records to keep.

If you only do 3 things

List every business cost from the year by category and attach a receipt or statement to each one.
Work out a defensible business-use percentage for your phone, internet, vehicle, and home.
Compare the simplified and actual-cost methods for your home office and vehicle before you file.

Disclaimer

Figures below say which tax year they apply to. Rates and thresholds change every year, and some changed mid-year in 2026, so confirm the number for the year you are filing on the official pages listed in Sources.

The rule behind every deduction

A deduction reduces your taxable profit, not your tax bill dollar for dollar. The IRS test is that a business expense must be both ordinary (common and accepted in your field) and necessary (helpful and appropriate for your business). It does not have to be indispensable. ^[1] The UK uses the term allowable expenses: the running costs of the business, excluding money you take out for personal use. ^[11]

Three decision rules cover most edge cases:

Mixed use gets split. If your phone is 40% business, you deduct 40% of the bill. GOV.UK gives the example of a £200 phone bill with £70 of business calls: you claim £70. ^[11]
Things you keep are usually capital. Equipment that lasts more than a year is often depreciated or written off through a special allowance rather than deducted like a monthly bill. Each country has a shortcut for small purchases (covered below).
No record, no deduction. If you can't show what you paid, when, and why it was for the business, assume the claim won't survive a review.

Common deductible expenses for freelancers

These categories apply in all four countries, with country-specific limits noted later:

Software and subscriptions: design tools, accounting software, cloud storage, project management, domain and hosting.
Equipment: laptop, monitor, camera, desk, chair.
Home office: a share of rent or mortgage interest, utilities and insurance, or a flat rate.
Phone and internet: the business share only.
Travel: business mileage or vehicle costs, trains, flights and accommodation for work trips. In the US most business meal costs are only 50% deductible. ^[1]
Professional fees: accountant, bookkeeper, lawyer, contract review.
Insurance: professional indemnity or liability, equipment cover.
Training: courses, books and conferences that maintain or improve skills for your current work.
Marketing: website, ads, portfolio hosting.
Platform and payment fees: marketplace service fees and card processing fees. The 1099-K and 1099-NEC briefing explains how US platform forms show gross amounts before those fees.

Not deductible anywhere: everyday clothing, personal meals, commuting to a regular workplace, fines and penalties, and the personal share of anything mixed-use.

United States: the deductions that matter most

Most freelance expenses go on Schedule C. A few of the biggest deductions are taken elsewhere on Form 1040, which is easy to miss.

Home office: simplified vs regular method

The space must be used regularly and exclusively for business under both methods. A dining table you also eat at doesn't qualify. ^[2]

Method	How it works	Trade-offs
Simplified	$5 per square foot, up to 300 sq ft (maximum $1,500)	No depreciation and no recapture when you sell; no carryover of disallowed amounts
Regular (Form 8829)	Business share of actual rent or mortgage interest, utilities, insurance, repairs and depreciation	Often larger for renters in high-cost areas; more records; depreciation is recaptured on sale

You choose the method each year on a timely filed original return and can't switch for that year afterwards. ^[2] ^[3]

Vehicle: the 2026 standard mileage rate

For 2026, the IRS business rate is 72.5 cents per mile for January 1 through June 30, and 76 cents per mile from July 1 through December 31, after a mid-year increase. For 2025 it was 70 cents. ^[4] The alternative is actual expenses (fuel, insurance, repairs, depreciation) multiplied by your business-use percentage. Either way, keep a log of date, destination, purpose and miles. Driving from home to a regular office is commuting, not business mileage.

Equipment: de minimis, Section 179 and bonus depreciation

De minimis safe harbor: if you elect it and don't have an applicable financial statement (most freelancers don't), you can deduct tangible items costing up to $2,500 per item or invoice instead of depreciating them. ^[1]
Section 179: for tax years beginning in 2026, you can expense up to $2,560,000 of qualifying property, reduced once total purchases exceed $4,090,000. ^[5] The 2025 tax law raised the base limit to $2.5 million with annual inflation indexing after 2025. ^[6] Section 179 can't create a business loss, so it helps most in profitable years.
Bonus depreciation: the 2025 tax law made a 100% first-year deduction permanent for qualified property acquired after January 19, 2025. ^[6]

If a laptop is used 70% for business, only 70% of its cost is deductible, whichever method you use.

Deductions that don't go on Schedule C

Half of self-employment tax. Self-employment tax is 15.3% (12.4% Social Security on the first $184,500 of combined earnings in 2026, plus 2.9% Medicare). You deduct the employer-equivalent half when working out adjusted gross income. It lowers income tax, not the self-employment tax itself. ^[7]
Self-employed health insurance. You may deduct medical, dental and qualified long-term care premiums for yourself and your family if you had a net profit, but not for any month you were eligible for a subsidized plan through your own or your spouse's employer. ^[8] The health insurance guide for freelancers compares coverage options, including Marketplace plans.
Retirement contributions. SEP IRA and Solo 401(k) contributions for yourself are deducted on Form 1040, not Schedule C. ^[1] The retirement guide for freelancers compares the 2026 limits.
Qualified business income (QBI) deduction. The 2025 tax law made this deduction (up to 20% of qualified business income) permanent. From 2026 there is a minimum $400 deduction if you have at least $1,000 of QBI from an active business. ^[9] For 2026, limits start above $201,750 of taxable income ($403,500 married filing jointly) and are fully phased in at $276,750 ($553,500). Those limits matter for consultants and other specified service businesses. ^[5] You can take it whether you itemize or not.

Worked example: what $10,674 of expenses is worth

A hypothetical US freelance designer, single, invoices $95,000 in 2026 and keeps records of these business costs:

Expense	Calculation	Deduction
Software and subscriptions	Actual cost	$2,400
Laptop	$2,200, 100% business, de minimis safe harbor	$2,200
Home office	180 sq ft × $5 (simplified)	$900
Mileage	800 mi × $0.725 + 1,000 mi × $0.76	$1,340
Internet	40% of $960	$384
Phone	50% of $1,200	$600
Client meals	50% of $500	$250
Accountant and contract review	Actual cost	$1,100
Liability insurance	Actual cost	$850
Courses and books	Actual cost	$650
Total		$10,674

Net profit falls from $95,000 to $84,326. Self-employment tax applies to 92.35% of net profit, so the expenses cut it by $10,674 × 0.9235 × 15.3% ≈ $1,508.

Income tax savings depend on your bracket and on knock-on effects: a smaller profit also means a smaller half-SE-tax deduction and a smaller QBI deduction. As a rule of thumb, assuming every dollar sits in the 22% bracket and below the QBI threshold, each $1,000 of expense saves about $141 of self-employment tax and about $164 of income tax, around $305 in total. So $10,674 of expenses is worth roughly $3,250 here, not $10,674. Spend money because the business needs it, not for the deduction.

If this designer rented a 1,200 sq ft apartment for $24,000 a year, paid $2,400 in utilities and $300 in renter's insurance, the regular method would give 15% (180 ÷ 1,200) of $26,700 = $4,005, far more than the $900 simplified figure, in exchange for Form 8829 and more records.

United Kingdom: allowable expenses and allowances

Trading allowance: up to £1,000 of trading income a year is tax-free. If you claim it, you can't deduct any other expenses or allowances. If your expenses are higher, claim them instead. ^[12]
Cash basis is the default for sole traders and partnerships without corporate partners. You can choose traditional accounting instead. ^[17] Under cash basis, most equipment you buy and keep is claimed as a normal allowable expense; cars still go through capital allowances. ^[11]
Simplified expenses for vehicles (2026 to 2027): 55p a mile for the first 10,000 business miles in a car or goods vehicle, 25p after that, and 24p for motorcycles. The first-10,000 rate rose from 45p, backdated to 6 April 2026. ^[13] ^[15] You can't use the flat rate for a vehicle you have already claimed capital allowances on. ^[13]
Simplified expenses for working from home: £10 a month for 25 to 50 hours, £18 for 51 to 100 hours, £26 for 101 hours or more. Phone and internet aren't included, so claim their business share separately. ^[14] The alternative is a reasonable share of actual costs, for example by rooms or time. ^[11]
Annual Investment Allowance (AIA): under traditional accounting, you can deduct the full cost of most plant and machinery up to £1 million a year. Cars are excluded and get writing down allowances. ^[16]

From April 2026, many sole traders also have to keep digital records and send quarterly updates. The Making Tax Digital checkpoint for 2026 to 2027 covers who is affected.

Canada: home, CCA and vehicles

Business-use-of-home expenses are deductible if the space is your principal place of business, or you use it only for business and regularly meet clients there. Use a reasonable split, such as office area divided by total area. For a shared room, also weight by business hours out of 24. These expenses can't create or increase a business loss, but the unused amount carries forward. ^[19] Example: a 10% office in a home with $24,000 rent, $3,000 utilities and $600 insurance gives 10% of $27,600 = $2,760.
Capital cost allowance (CCA): equipment is deducted over several years by class rather than all at once. ^[20] The Accelerated Investment Incentive boosts the first-year claim for property available for use before 2028, at a reduced level for 2024 to 2027. ^[21] Claiming CCA on your home office can trigger recapture and capital gains rules when you sell, so think carefully before you do. ^[19]
Vehicle: deduct the business share of costs (business km ÷ total km), backed by a logbook with date, destination, purpose and km. After a full base year, a three-month sample log can be used. ^[22] For 2026, the passenger-vehicle CCA ceiling (Class 10.1) is $39,000 before tax, the zero-emission ceiling is $61,000, interest is capped at $350 a month and lease costs at $1,100 a month. ^[23]

Australia: home office, assets and car

Working from home, fixed rate method: 70 cents per hour worked from home for 2024–25 and 2025–26, covering energy, internet, phone and stationery. You need a record of actual hours for the whole year; estimates aren't accepted. ^[26] When this guide was reviewed, the ATO had not yet published a 2026–27 rate, so check before lodging your 2026–27 return. Example: 1,200 logged hours in 2025–26 × $0.70 = $840.
Occupancy expenses (rent, mortgage interest, rates, insurance) are only claimable if part of your home has the character of a place of business. A desk in the living room doesn't qualify. ^[25]
Instant asset write-off: small businesses with aggregated turnover under $10 million can immediately deduct assets costing less than $20,000 each. The ATO says the $20,000 threshold is now permanent from 1 July 2026 and is law. More expensive assets go into the simplified depreciation pool. ^[29]
Car: the cents per kilometre method is 88 cents for 2025–26 and 91 cents for 2026–27 (an 89-cent base plus a one-off 2-cent uplift), up to 5,000 business km per car. The rate covers all running costs including depreciation. ^[27] ^[28] Above that, use the logbook method.

Record-keeping rules by country

Country	Keep records for
US	Generally 3 years after filing; 6 years if you under-report income by more than 25%; 7 years for bad debt claims; property records until the period closes for the year you dispose of it. ^[10]
UK	At least 5 years after the 31 January submission deadline for that tax year. ^[18]
Canada	6 years from the end of the last tax year they relate to (from the filing date if you filed late). ^[24]
Australia	Generally 5 years, longer for some asset and CGT records. ^[30]

A weekly habit beats a year-end scramble: photograph receipts, tag them by category and note the business purpose. The weekly tax tracking workflow turns this into a short weekly routine.

Common mistakes

Claiming 100% of a mixed-use phone, car or laptop. Pick a defensible percentage and keep the evidence behind it.
Claiming a US home office for a shared room. Exclusive use is required.
Using one mileage rate for all of 2026 in the US. Miles before July 1 use 72.5 cents; miles from July 1 use 76 cents.
Forgetting the deductions outside Schedule C: half of SE tax, health insurance, retirement and QBI.
Taking the UK £1,000 trading allowance when your expenses are higher.
Buying things for the deduction. A deduction returns a fraction of what you spend.
Ignoring tax on the profit that remains. Use the tax set-aside calculator on your net profit, after expenses.

Before-you-file checklist

Export income records and reconcile them with 1099s, platform reports or bank deposits.
Total each expense category and attach receipts or statements.
Calculate business-use percentages for phone, internet, vehicle and home.
Choose your home office and vehicle methods for the year.
List equipment bought, with dates, costs and business-use share.
Gather health insurance premiums and retirement contribution confirmations.
Check the dates for your country in the winter 2026–2027 freelance tax calendar.

US filers can follow the full process in the US federal tax return guide.

FAQ

What business expenses can freelancers deduct?

Generally, any cost of running your freelance business: software, equipment, a share of home, phone and internet costs, business travel, professional fees, insurance, training and marketing. In the US the test is whether the cost is ordinary and necessary for your work; in the UK it is an allowable expense. Personal costs, and the personal share of mixed costs, are not deductible.

Can I deduct a home office if the room is also used for personal things?

In the US, no: both the simplified and regular methods need space used regularly and exclusively for business. The other countries are more flexible. The UK lets you use a flat rate or a reasonable share of costs, Canada allows an hours-based share of a shared space if it is your principal place of business, and Australia's fixed rate method for running costs does not need a dedicated room.

What is the IRS business mileage rate for 2026?

72.5 cents per mile for business miles driven from January 1 to June 30, 2026, and 76 cents per mile from July 1, 2026, after the IRS raised the rate mid-year. Keep a mileage log with dates, destinations, purposes and miles so you can apply the right rate to each half of the year.

Should I use the UK trading allowance or claim my actual expenses?

You can't do both in the same year. If your allowable expenses are more than £1,000, claiming them usually gives a bigger deduction. If they are small, the £1,000 trading allowance is simpler and needs no expense records.

How long should freelancers keep receipts?

In the US, generally 3 years after filing, and longer in some cases, such as 6 years if you under-report income by more than 25%. In the UK, at least 5 years after the 31 January submission deadline. In Canada, 6 years from the end of the tax year they relate to. In Australia, generally 5 years.

Sources

Primary sources referenced above (checked November 4, 2026)

Tools and templates

Tax Set-Aside Calculator

Work out how much of each month's freelance income to move into a tax reserve at a percentage you choose, and how to pick it from your records.

Open Tax Set-Aside Calculator

Weekly Review Checklist

A 20-minute weekly admin reset checklist for pipeline, delivery, and money so your freelance business doesn’t run on panic.

Open Weekly Review Checklist

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Status

Last reviewed: Nov 04, 2026

Change log

Nov 04, 2026: Published a guide to freelance tax deductions with 2026 figures for the US (home office, the mid-year mileage rate change, Section 179, bonus depreciation, health insurance, QBI), UK allowable and simplified expenses, Canadian home, CCA and vehicle rules, Australian fixed rates and the instant asset write-off, a worked example, and record-keeping periods for each country.