In this article, let’s talk about what expenses can I deduct as a 1099 contractor?
Tax deductions are gold, especially if you are self-employed, paying all your expenses out of pocket. When you work for yourself, the IRS considers you a business. This means that you can deduct the most reasonable and necessary business expenses on your tax return. As an independent contractor, taxes can be too high. Rather than having an employer or business take your taxes off your entire payroll.
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You should keep track of what you owe and make sure the IRS gets theirs. It sounds complicated, but it doesn’t have to be. For 1099 taxes, Stride has you covered
9 Best Tax Deduction as a 1099 Contractor:
1. Self-employment tax:
This is probably the most confusing and miscalculated 1099 tax for workers. To break it down, self-employment tax refers to what an employer normally pays for Medicaid and Social Security. But if you are self-employed you have this tax liability. This means that you pay twice as much as the employer and the employee.
This is how it’s summarised:
- 6.2 percent Social Security tax on the first $128,700 of taxable income
- Medicare tax 1.45 percent regardless of the amount of taxable income
2. Home office expenses:
Deducting part of your home can be tricky, but you can basically write off the cost of any part of your home that is used regularly and exclusively as your primary place of business with the home office tax deduction. This is true whether you rent or own your home and home office. Actual savings can be increased by taking this deduction because the same percentage of claimed square footage can be applied to mortgage interest, depreciation, property taxes, utilities, homeowners insurance, and home maintenance costs. But if you can’t get all your records and expenses in time for your tax return, you can take the simplified deduction method up to $1,500.
3. Internet, cell phone bill, laptops and widgets:
Even if you don’t take the home office deduction, you can deduct the cost of a phone you use for work, fax, and the Internet. But you want to make sure you only claim costs directly related to your 1099 employment contract. So if you only have one phone, you will generally claim the estimated percentage of time you use the phone for work. . But if you have a second phone line that you use exclusively for business, you can deduct 100 percent of that phone bill. The same rule applies to your internet bill.
In the case of laptops, cell phones, tablets, and other software and high-tech that most of us run in both our business and personal lives, you have the option of how to deduct the costs of those assets.
Do you have to travel to another city to work? Travel expenses such as accommodation, airfare, car rental, and local transportation are deductible. Be careful not to incur personal expenses here, such as meals with friends while traveling. Meals during the trip should be grouped under the category of meals described below. One caveat to this deduction: your travel should be “overnight, away from where you live and primarily for business.
5. Commission and fees:
For on-demand workers like Uber, you can deduct the fees that Uber charges as a business expense. Make sure you don’t pay taxes on your commission, they are taxes on money that has never made it into your bank account! If you are a real estate broker or sales professional, you can deduct commissions or fees paid to non-employees to generate income.
6 . Utilities:
If you have office space, you can deduct utilities like electricity, water, trash, and the internet. However, you cannot deduct utilities for a home office using this category; these go with your “home office” deduction.
7. Start-up costs:
When starting your business, the IRS generally requires you to deduct the largest startup costs over time as capital costs rather than as a one-time cost in a tax year. But you are allowed to deduct up to $ 5,000 in business start-up costs. Examples of initial tax deductible expenses that can contribute to your $ 5,000 write off include industry research, travel related to starting your business (e.g. scoping and checking potential business sites and employees), advertising, fees of lawyers, business licenses and accounting fees for tax advice.
8. Training and education:
If you are one of the millions of Americans who took out a loan to pay for higher education costs for yourself, your spouse, or anyone claiming as a dependent, you may qualify for a deduction of up to $ 2,500, depending on your income level. (Which means that if you earn more than a certain amount, you will not qualify for this deduction). Additionally, the Lifelong Learning credit is based on income, but can provide students with an additional benefit of up to $ 2,000 per year.
While meals are a tax-deductible business expense, the IRS will claim the income if they inspect you and buy a $ 2,000 bottle of champagne, you’re probably in luck. Personal meals are not eligible and you will want to have some sort of document to support the claim that the food was business related. If you keep your receipts, you can deduct the actual cost 50 percent of your meal costs.
Before you go, I hope this above article what expenses can I deduct as a 1099 contractor? Will be helpful and informational for you.