The standard mileage rate went up to 72.5 cents per mile for 2026. The QBI deduction is now permanent. Solo 401(k) limits rose to $23,500. Most freelancers and contractors in Michigan are still using last year's numbers, or missing deductions entirely. Here's what actually applies for this tax year, plus what's specific to filing in Michigan.
2026 IRS figures per IRS Notice 2026-10 and the One Big Beautiful Bill Act (OBBBA). General information, not tax advice for your specific return.
A handful of real changes landed for the 2026 tax year, and most self-employed filers haven't adjusted their numbers yet:
Not all deductions are equal. These five typically account for the largest share of tax savings for self-employed Michigan filers:
Deduct up to 20% of your qualified business income directly off taxable income, no itemizing required. On $80,000 in net business income, that's potentially $16,000 off your taxable income. Phase-outs apply for certain service businesses (law, accounting, consulting) above specific income thresholds.
72.5 cents per business mile in 2026, covering gas, maintenance, insurance, and depreciation in one number. Drive 12,000 business miles and that's $8,700 off your taxable income. Or use the actual expense method if you have a less fuel-efficient or expensive vehicle, but you can't switch methods after year one.
A Solo 401(k) allows up to $23,500 in employee contributions ($31,000 if 50+), plus an employer contribution of up to 25% of net self-employment income. A SEP IRA allows up to 25% of net SE income, capped at $70,000. This is one of the few deductions that benefits you twice: lowers your tax bill now and builds retirement savings.
Deduct 100% of health, dental, and qualifying long-term care insurance premiums for yourself, your spouse, and dependents, directly above the line on Form 1040 — not subject to the 2-AGI itemized threshold that applies to employees.
Simplified method: $5 per square foot, up to 300 square feet ($1,500 max). Regular method: actual percentage of rent/mortgage, utilities, and insurance based on office square footage — usually larger if your office takes up more than 10% of your home, but requires more recordkeeping.
You pay 15.3% SE tax on 92.35% of net self-employment income, but you can deduct half of that amount on Schedule 1. This mirrors the employer-side payroll tax that a traditional employer would have paid on your behalf.
| Category | Examples | Schedule C Line |
|---|---|---|
| Advertising | Website costs, Google Ads, social media ads, business cards | Line 8 |
| Vehicle/mileage | 72.5¢/mile standard rate, or actual expenses (gas, insurance, depreciation) | Line 9 |
| Contract labor | Payments to subcontractors and freelancers you hire | Line 11 |
| Depreciation / Section 179 | Computers, equipment, furniture (often fully deductible in year one under 100% bonus depreciation) | Line 13 |
| Insurance | General liability, professional liability (E&O), cyber liability | Line 15 |
| Legal & professional services | Attorney fees, accountant/bookkeeper fees, consultants | Line 17 |
| Office expenses | Supplies, software subscriptions (CRM, accounting, project management) | Line 18 & 22 |
| Taxes & licenses | Business licenses, state/local business taxes | Line 23 |
| Travel | Airfare, hotels, transportation for business trips | Line 24a |
| Meals | 50% deductible for business-related meals with documented purpose | Line 24b |
| Utilities | Business-use percentage of phone and internet | Line 25 |
| Home office | Simplified ($5/sq ft, max $1,500) or regular method (actual percentage) | Line 30 |
If your net self-employment income exceeds roughly $50,000–$80,000, electing S-corp status can reduce self-employment tax significantly by splitting income into a reasonable salary (subject to FICA) and distributions (not subject to SE tax). On $100,000 net income, this can save $4,000–$6,000 annually after accounting for added payroll and compliance costs.
Michigan's Flow-Through Entity (FTE) election at 4.25% becomes available once you've made the S-corp switch, offering an additional workaround for the federal SALT deduction cap.
Federal and Michigan returns filed together, with every applicable deduction reviewed against your actual records, not a generic checklist.
Calculated based on your actual year-to-date income, not last year's number, so April doesn't bring a surprise.
If your income justifies it, we model the real savings, set up payroll, and document a defensible reasonable salary from day one.
Monthly categorization and reconciliation so your deductions are documented as the year happens, not reconstructed in March.
SEP IRA, Solo 401(k), or SIMPLE IRA, set up correctly with contribution limits calculated for your specific income.
If you suspect you've missed deductions in past returns, we review and file amended returns where it makes sense.
Our office is at 32008 Harper Ave in St. Clair Shores. We work with freelancers, consultants, contractors, and gig workers throughout:
The IRS standard mileage rate for 2026 is 72.5 cents per mile for business driving, up from 70 cents in 2025. You can add parking fees and tolls on top of this rate. You must choose either the standard mileage rate or the actual expense method in the first year you use a vehicle for business, and you generally can't switch methods later for that same vehicle.
Yes. The Qualified Business Income (QBI) deduction was set to expire after 2025 but was made permanent under the One Big Beautiful Bill Act (OBBBA). Eligible self-employed filers can deduct up to 20% of qualified business income. Starting in 2026, a minimum $400 deduction applies if you have at least $1,000 of qualified business income, even if the standard calculation produces less.
Up to $23,500 in employee contributions if you're under 50, or $31,000 if you're 50 or older, plus an employer contribution of up to 25% of net self-employment income. The combined limit is generally capped around $72,000 (or $80,000 for those 50 and older), making it one of the largest available deductions for profitable self-employed filers.
Yes. Self-employed individuals can deduct 100% of health, dental, and qualifying long-term care insurance premiums paid for themselves, their spouse, and dependents. This is an above-the-line deduction on Form 1040, available even if you don't itemize. The deduction isn't available for any month you were eligible to participate in an employer-sponsored plan (your own or a spouse's).
The space must be used regularly and exclusively for business. Keep records of square footage, a description of how the space is used, and (for the regular method) receipts for rent/mortgage, utilities, and insurance. The simplified method just requires accurate square footage up to 300 square feet, calculated at $5 per square foot.
Most tax professionals point to roughly $50,000-$80,000 in net self-employment income as the break-even point, since S-corp compliance costs (payroll, additional tax prep, state fees) typically run $3,500-$5,000 per year. Below that range, the added cost often exceeds the self-employment tax savings.
Federal deductions like QBI, mileage, home office, and retirement contributions reduce your federal taxable income, which flows through as the starting point for your Michigan return. Michigan applies its flat 4.25% rate to that reduced income, so maximizing federal deductions also lowers your Michigan tax liability. There's no separate Michigan self-employment tax.
Bring your records to a free consultation. We'll review your specific income and expenses against the full 2026 deduction list, not just the obvious ones.
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