Of the 150 million workers in the United States, 16 million — or roughly 10% — are self-employed. Although self-employed workers do share a few key characteristics, America’s sole proprietors are a diverse group that varies in age, ethnicity, gender and education level.
Many businesses start off as sole proprietors, as they are relatively easy to set up, even for the inexperienced, and they offer individuals the freedom to set their own schedule and work as they want. As an added benefit, sole proprietors are eligible for a host of deductions and credits that individual taxpayers cannot claim.
Here are nine of the most helpful deductions and tax credits for sole proprietors.
Qualified Business Income Deduction
The qualified business income deduction, commonly known as the QBI deduction or the Section 199A deduction, is a temporary tax law that was established with the passage of the Tax Cuts and Jobs Act (TCJA). In tax years 2018 through 2025, certain sole proprietors can take deductions equal to 20% of their business income, with adjustments.