How to Legally Pay Zero Taxes as a Freelancer in the USA

Freelancing offers unmatched flexibility and freedom, allowing individuals to work on their own terms. However, one of the biggest challenges for freelancers is managing taxes. Unlike traditional employees who have taxes automatically withheld, freelancers are responsible for calculating and paying their own taxes. While it’s impossible to completely eliminate taxes, there are legal ways to significantly reduce your taxable income — and in some cases, you may even end up paying zero taxes.

By understanding the intricacies of the tax code and leveraging deductions, tax credits, and other legal strategies, freelancers can keep more of their hard-earned money. This guide explores effective ways to legally minimize taxes as a freelancer in the USA.

1. Maximize Business Deductions

As a freelancer, you are essentially a business owner, and the IRS allows you to deduct legitimate business expenses to lower your taxable income. By taking full advantage of these deductions, you can offset much of your income, effectively reducing your overall tax liability.

• Common Deductible Expenses:

  • Home office costs if you use a portion of your home exclusively for business.

  • Office supplies such as paper, pens, and other essentials.

  • Internet and phone bills if they are used for business purposes.

  • Software and subscriptions necessary for your work.

    Also read :

    A Complete Guide to Health Insurance Deductibles and Copayments in 2025

  • Marketing and advertising expenses to grow your freelance business.

  • Professional services such as accounting or legal advice.

Tip: Keep detailed records and save receipts to substantiate these deductions if audited.

2. Take Advantage of the Qualified Business Income Deduction (QBI)

The Qualified Business Income (QBI) deduction allows eligible freelancers to deduct up to 20% of their qualified business income. This deduction was introduced as part of the Tax Cuts and Jobs Act (TCJA) and is available to freelancers, independent contractors, and small business owners.

• Eligibility Criteria:

  • Your business must be structured as a sole proprietorship, partnership, S corporation, or LLC.

  • Your taxable income should be below the threshold ($182,100 for single filers and $364,200 for joint filers in 2025).

If you qualify, this deduction can significantly reduce the amount of income subject to federal income tax.

3. Open and Maximize Contributions to a Retirement Account

Contributing to a retirement account not only helps you save for the future but also reduces your taxable income. As a freelancer, you have several retirement account options that allow you to deduct contributions from your taxable income.

• Popular Retirement Accounts for Freelancers:

  • SEP IRA: Allows contributions of up to 25% of your net earnings, with a cap of $66,000 for 2025.

  • Solo 401(k): Enables contributions as both an employer and employee, allowing you to contribute up to $69,000 if you are under 50, or $76,500 if you are over 50.

    Also read :

    Best Side Hustles for South Africans That Pay in USD

  • Traditional IRA: Contributions may be tax-deductible depending on your income level.

Contributing to these accounts helps lower your taxable income while building long-term financial security.

4. Deduct Health Insurance Premiums

Freelancers who purchase their own health insurance may be able to deduct their premiums as an adjustment to income. This deduction applies to premiums paid for yourself, your spouse, and your dependents, provided you are not eligible for employer-sponsored health insurance through another source.

• Qualifying Expenses:

  • Medical, dental, and long-term care insurance premiums.

  • Premiums for health plans purchased through the Affordable Care Act (ACA) marketplace.

By deducting these expenses, you can reduce your taxable income and potentially lower your tax bill.

5. Leverage the Home Office Deduction

If you work from home as a freelancer, you may qualify for the home office deduction. This deduction allows you to write off a portion of your home expenses, such as rent, utilities, and maintenance, based on the percentage of your home used exclusively for business.

• Two Methods to Calculate:

  • Simplified Method: Deduct $5 per square foot, up to 300 square feet.

  • Regular Method: Deduct actual expenses based on the percentage of your home dedicated to your business.

The home office deduction can significantly reduce your taxable income if you qualify.

6. Write Off Equipment and Technology Purchases

Freelancers often need technology and equipment to perform their work. The IRS allows you to deduct the cost of purchasing and maintaining business-related equipment, including computers, cameras, software, and other essential tools.

• Section 179 Deduction: Enables you to deduct the full cost of eligible equipment in the year it was purchased, rather than depreciating it over time.

• Bonus Depreciation: Allows you to deduct a significant portion of the cost of new or used equipment purchased for your business.

These deductions can greatly reduce your taxable income, making it possible to legally minimize your tax liability.

7. Track and Deduct Business Mileage

If you use your vehicle for business purposes, you can deduct the mileage driven for work-related activities. The IRS allows freelancers to deduct either the standard mileage rate or actual expenses incurred.

• Standard Mileage Rate for 2025: Expected to be around $0.65 per mile.

• Actual Expense Method: Allows you to deduct actual costs, such as gas, maintenance, and insurance.

Accurate mileage tracking can lead to significant deductions and lower your taxable income.

8. Utilize Health Savings Account (HSA) Contributions

If you have a high-deductible health plan (HDHP), contributing to a Health Savings Account (HSA) can help reduce your taxable income. Contributions to an HSA are tax-deductible, and the funds can be used tax-free for qualified medical expenses.

• Contribution Limits for 2025:

  • $4,150 for individuals.

  • $8,300 for families.

Funds in an HSA roll over year after year, making it a powerful tool to lower your taxable income while saving for future healthcare expenses.

9. Hire Family Members to Reduce Taxable Income

Freelancers can legally hire family members to help with their business and deduct their salaries as a business expense. This strategy can shift income to family members who may be in a lower tax bracket, ultimately reducing the freelancer’s overall taxable income.

• Requirements:

  • The work must be legitimate and necessary for the business.

  • Pay should be reasonable and aligned with industry standards.

By employing family members, you can reduce your taxable income while keeping money within your household.

10. Form an LLC or S Corporation for Additional Tax Benefits

Many freelancers operate as sole proprietors, but forming an LLC or electing S Corporation status can provide additional tax benefits. An S Corporation allows freelancers to split income between salary and distributions, which can reduce the amount of self-employment taxes owed.

• Benefits of Forming an S Corporation:

  • Pay yourself a reasonable salary and take the remainder as distributions, which are not subject to self-employment taxes.

  • Ability to deduct business expenses and qualify for the QBI deduction.

    Also read :

    New Traffic Fines & Laws in South Africa: What Drivers Need to Know in 2025

While forming an LLC or S Corporation involves additional paperwork and costs, the potential tax savings can be substantial.

Reducing taxes as a freelancer in the USA requires careful planning and a solid understanding of the tax code. By maximizing deductions, contributing to retirement accounts, and taking advantage of tax credits, it’s possible to minimize your tax liability — and in some cases, legally reduce it to zero. Keeping detailed records, staying informed about tax law changes, and working with a qualified tax professional can help ensure that you make the most of these opportunities.