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What Nigerian creators and freelancers can actually deduct under the Nigeria Tax Act 2025

TL;DR

Here’s something many creators do not realize until tax season gets uncomfortably close: you can spend money all year to keep your work moving and still overpay tax because you did not know what counts, what does not, and what belongs in a different bucket.

Think about a normal month:

Those are not random lifestyle costs. They are usually part of the cost of earning your income.

But the minute you start mixing in private spending, or you buy something big like a laptop, camera, or car, the answer changes.

This is also where Hagfish can quietly save you stress. Most people do not lose deductions because the law hid them. They lose them because they did not track the expense properly when it happened.

When you log an expense in Hagfish, you can mark it as a Business expense, and Hagfish now auto-fills Tax deductible defaults based on the expense category. Then, when tax time comes, Hagfish can pull together the expenses already marked as deductible instead of forcing you to reconstruct the whole year from bank alerts and half-remembered subscriptions.

The rule in plain English

This post is about the part of the new law that applies to profits from a trade, business, profession, or vocation. That is the bucket most freelancers, creators, consultants, developers, designers, editors, coaches, and one-person studios fall into.

The easiest way to think about the new Act is this:

  1. If the expense exists because your business exists, it is usually easier to defend.
  2. If the expense also clearly serves your personal life, it becomes weaker and usually needs apportionment.
  3. If the expense buys you a long-term asset, it is usually a capital-allowance question, not a normal expense deduction.

That is really the whole game.

The law is helpful in one direction and strict in another:

So the real question is not just, "Did I spend money?"

It is, "What kind of spend was this?"

Green light: expenses creators can usually deduct now

These are the expenses most creators and freelancers can usually defend without drama, as long as the spending is genuinely tied to work and properly documented.

Domains, hosting, cloud tools, and web infrastructure

If your website, client portal, portfolio, ecommerce site, or course platform helps you earn income, the day-to-day cost of keeping it online is usually a normal business expense.

Examples:

Example:

You run a paid newsletter and landing page for sponsorship deals.

That is the kind of spending the law is usually more comfortable with. You are not building a personal luxury here. You are paying to keep the thing that earns you money alive.

Important nuance:

Software subscriptions

Recurring software costs are one of the cleanest deductions for modern creators and freelancers.

Examples:

If you pay monthly or annually to access a tool you use to produce deliverables, manage projects, edit content, host files, or run client work, it will usually sit comfortably inside the section 20 logic.

Example:

A video editor pays for:

Nobody pays for those tools for fun. They are part of the machine.

Internet, data, phone, and communication tools

For many Nigerian freelancers, internet is not optional. It is the business.

Examples:

If you use one connection for both work and personal life, claim only the business share.

Example:

You spend ₦80,000 monthly on internet and can reasonably show that about 75% of usage is for client calls, uploads, editing sync, and project delivery.

Your more defensible deduction is the business portion, not the full household number.

Studio, office, and coworking rent

Section 20(b) specifically allows rent and premiums on land or buildings occupied to generate income.

Examples:

Example:

You are a photographer paying:

Those are far easier to defend than claiming your entire home rent.

Contractors, collaborators, and outsourced work

If you pay other people to help produce the work you sell, those payments are usually ordinary business expenses.

Examples:

Example:

A YouTube creator pays:

These are usually easier to deduct than buying a new camera body.

Payment processing fees, bank charges, and business admin costs

Creators lose money here quietly all year and forget it at tax time.

Examples:

If it is a cost of getting paid, staying compliant, or keeping the business in motion, it is often deductible.

Repairs and maintenance

Section 20(d) is useful here. It allows repair costs for premises, plant, machinery, or fixtures used to generate income.

Examples:

Repairs are easier than upgrades.

Example:

Pre-launch expenses before the business properly starts

One underrated part of section 20(j) is that certain expenses incurred within six years before commencement may be treated as if they were incurred on the first day of business, if they would have been deductible after launch.

That matters because a lot of creators spend before they officially "start."

You buy the domain first. You pay for the first tools first. You test the idea first.

Then the income comes later.

Example:

You spent money before launch on:

If those expenses are of the kind that would normally be deductible after launch, section 20(j) may help.

Bad debts from clients who do not pay

Section 20(h) allows bad or doubtful debts in certain cases.

This matters if:

Example:

You delivered a branding project for ₦600,000, recognized the revenue, chased the client for months, and the receivable became unrecoverable.

That is not the same thing as simply failing to collect a deposit. It is a bad-debt issue and can matter in your tax computation.

Yellow light: deductible, but only if you handle it carefully

These are the expenses people love to over-claim.

Fuel, diesel, electricity, and generator costs

Yes, these can be deductible.

But only to the extent they are tied to work.

Examples that are easier to defend:

Examples that are harder:

Example:

You are a freelance videographer and keep a simple log showing:

That is far more defensible than simply throwing your full monthly fuel spend into a spreadsheet and calling it business.

Home internet, home electricity, and home rent

This is the classic mixed-use zone.

You may have a reasonable claim to the business portion, but this is where people get sloppy and overstate.

Safer approach:

Example:

If you work from home and estimate that 30% of your electricity supports your editing station, router, lights, and work equipment, that is more defensible than claiming 100%.

Important distinction:

If you want to claim both a business-use share of home rent and the separate personal rent relief on the same rent, get proper advice first. That is not a place to improvise.

Education, courses, books, and conferences

These can be defensible when they are directly tied to your current income-producing work, but they are not as clean as rent, software, or contractor fees.

Stronger cases:

Weaker cases:

Keep the invoice and keep a short note explaining the business purpose.

Clothes, makeup, grooming, and appearance

This is one of the easiest places to get carried away.

Usually weak:

Potentially stronger, but still sensitive:

As a simple rule, if you would still buy it even if you had no clients, no audience, and no business, the claim is usually weak.

Red light: things you usually should not deduct

Section 21 is blunt here.

Usually non-deductible:

Examples:

Also important:

That means messy paperwork is not a harmless detail.

Big purchases are different: claim capital allowance instead

This is the part many freelancers miss, and it is where a lot of confusion starts.

The new Act generally blocks direct deduction for capital expenditure under section 21(b). But for both companies and individuals, the Act also allows capital allowance through the First Schedule and section 28(2)(b)(ii).

In practical terms:

The official table in the First Schedule groups capital allowance classes like this:

Class Rate Broad categories in the Act
1 10% Building, agricultural expenditure, mast expenditure, intangible assets, heavy transportation
2 20% Plant expenditure, agricultural equipment, furniture and fittings, mining expenditure, other equipment
3 25% Motor vehicles, software, other capital expenditure

Practical mapping for creators and freelancers:

Asset Likely treatment Practical note
Laptop, camera, lighting kit, generator, inverter, printer Usually capital allowance, often closest to plant or other equipment Usually not a full one-year expense deduction
Desk, chair, shelves, studio furniture Usually capital allowance Furniture and fittings are in the schedule
Car used for client visits or shoots Usually capital allowance Be conservative on mixed personal use
Purchased software or perpetual licence Usually capital allowance The schedule expressly includes software expenditure

Important nuance:

Examples that make the rule real

Example 1: domain, Render, Adobe, fuel, and internet

A freelance designer earns ₦9,000,000 in the year and incurs:

Those are generally the kind of recurring costs that are easier to defend under section 20, assuming the records are clean.

Example 2: laptop and camera

The same designer buys:

This is where a lot of people make the wrong move.

They think, "I bought it for work, so I should deduct everything this year."

But these are long-term business assets, so the better question is capital allowance, not immediate full deduction.

The same logic usually applies if you invest in:

Those are often real business costs, but they are usually closer to equipment or plant than to an ordinary recurring expense.

Example 3: bad debt

A creator invoices a Nigerian brand ₦850,000, delivers the campaign, records the receivable, follows up for months, and eventually concludes the debt is bad.

That can be a tax issue under the bad-debt rule, not just a painful business story.

Example 4: paying in dollars

You pay for:

Under section 20(4), foreign-currency expenses are deductible only to the extent of their naira equivalent at the official CBN exchange rate for the relevant date or period.

So do not just type "roughly ₦whatever" from memory at year end.

How Hagfish helps you track this without overthinking it

Hagfish already does something useful here today.

On the expense form:

That is the right level of product help.

It speeds up capture without pretending the app is doing full legal analysis for you.

Categories that currently default to tax deductible

Today, Hagfish defaults these categories to tax deductible:

That is useful because these are the categories creators and freelancers most often mean to claim, but still forget to classify properly.

You should not have to do mini tax analysis from scratch every time you pay MTN, coworking, Paystack, or a contractor.

Categories that currently default to not tax deductible

Today, Hagfish defaults these categories to not tax deductible:

That is also sensible.

These are exactly the kinds of expenses where people overclaim too easily, or where the better answer may be capital allowance instead of a simple same-year deduction.

Categories Hagfish leaves manual

Today, Hagfish leaves these manual:

That is a good tradeoff because these often need context.

An editing course may be easier to defend than broad personal development. Insurance may be business-related or personal. Other is too vague to guess safely.

Important nuance

These are smart defaults, not guarantees.

They help you classify faster, but they do not replace judgment.

That matters for mixed-use or context-heavy spending like:

Those may be very real business costs, but they often need either:

Why this matters

This kind of feature does two useful things at once.

First, it reduces friction. A user logging 40 expenses in a month should not have to do tax interpretation from scratch on every row.

Second, it improves the quality of the data Hagfish uses later in the tax assistant. If the expense categories and deductible flags are cleaner during capture, the year-end tax summary becomes far more useful.

That is the real promise.

Not: "Hagfish files your taxes by guessing."

But: "Hagfish helps you capture expenses in a way that is much closer to filing reality."

That may sound small, but it is the difference between showing up at filing time with a usable record and showing up with a vague memory of what that debit alert was for.

The receipts and records you should keep

The new Act is generous to genuine business spending, but it is not casual about proof.

For individuals, section 31 says deductions must be claimed in writing, and section 32 lets the tax authority ask for "documentary evidence" and refuse claims where the evidence is missing or inadequate.

Keep:

If your records are a mess, the law gives the authority room to fall back on a presumptive approach under section 29.

That is another way of saying: bad records can get expensive.

A simple creator checklist

Before you claim an expense, ask:

  1. Did I incur this because I was earning business income?
  2. Is it private, mixed, or purely business?
  3. Is it a recurring operating cost or a long-term asset?
  4. Do I have clean proof?
  5. If it is mixed-use, have I used a conservative split?
  6. If it is a big asset, should I be thinking capital allowance instead?

Final thought

The new Nigeria Tax Act 2025 is actually pretty clear on the core idea: ordinary business-running costs are deductible, private spending is not, and assets live in a different bucket.

For creators and freelancers, the tax savings are usually hiding in boring places:

Miss those and you overpay tax.

But the bigger mistake is the opposite one: treating your entire life as a business deduction just because you post online or work for yourself.

The winning move is not aggressiveness. It is clean classification.

And that is really the nudge here: do not wait until year end to figure this out. Track the expense when it happens. Mark whether it is a business expense. Let Hagfish prefill the obvious deductible categories. Attach the receipt while it is still in your WhatsApp or email.

If you already use Hagfish, use that workflow as you go, not as a cleanup exercise in March. That is where the real tax win is.

Sources used

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