In 2025, gig workers can utilize several “above-the-line” and “below-the-line” deductions to reduce their taxable income.
Notably, the 2025 standard mileage rate has increased to 70 cents per business mile.
Top Business Deductions (Schedule C)
If you are an independent contractor (1099 worker), you can deduct “ordinary and necessary” business expenses on Schedule C:
- Vehicle Expenses: Choose between the standard mileage rate (70ยข/mile) or actual expenses (gas, repairs, insurance, depreciation).
- Home Office: Deduct a portion of your rent, utilities, and internet if you have a dedicated workspace used exclusively for business.
- Equipment & Supplies: Computers, software, cell phones (business use percentage), and specialized tools (e.g., delivery bags, cleaning supplies).
- Professional Services: Fees for tax preparation, legal advice, and business-related software subscriptions.
- Marketing: Costs for advertising, website hosting, and social media promotions.
2025 Tax Changes & New Forms
The 2025 tax year introduces the new Schedule 1-A, which includes temporary “bonus” deductions available regardless of whether you itemize or take the standard deduction:
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- Tip Deduction: Workers may deduct up to $25,000 of tips earned during the year.
- Overtime Deduction: You may deduct up to $12,500 ($25,000 if married filing jointly) of overtime compensation.
- Car Loan Interest: Deduct up to $10,000 in interest paid on a loan for a vehicle assembled in the U.S. and purchased after 2024.
- Senior Deduction: A new deduction of up to $6,000 for workers aged 65 or older.
Additional Self-Employed Benefits
- Qualified Business Income (QBI) Deduction: Eligible gig workers can deduct up to 20% of their net business income.
- Health Insurance: If you pay for your own health insurance and have business profit, you can typically deduct 100% of your premiums.
- Self-Employment Tax Adjustment: You can deduct 50% of the 15.3% self-employment tax you pay (Social Security and Medicare) from your adjusted gross income.
- Retirement Savings: Contributions to a Solo 401(k) or SEP IRA are generally tax-deductible.
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