As an independent contractor, you are a business of one.
This gives you the freedom to make your own schedule, and chart your career path, which can be exhilarating, and may be one of the reasons you chose to build your own business in the first place.
But unlike a full-time employee, whose taxes are automatically deducted from their paycheck, it’s also your job as a 1099 employee to deduct your own taxes from your earnings.
Luckily, you don’t pay taxes on every single dollar you earn. As a self-employed contractor, you have a 1099 form and pay taxes on the amount you earned minus the costs of running your business.
You can claim numerous deductions when you file your taxes on tax day. Your 1099 independent contractor deductions lower the amount you’ll ultimately have to pay in taxes as a self-employed contractor.
What can you write off on taxes? Let’s explore eight categories of independent contractor tax deductions.
Note: The advice in this article not meant to replace the advice of a tax professional. Businesses and their tax needs vary, and you should discuss all tax issues with a qualified, licensed professional.
1. Home office
Depending on your profession, you may have significant expenses associated with your home office. Your home could be used as an office, a yoga studio, a place to store expensive equipment, or something else altogether.
Is your home office space is used only for work, and it is your primary place of business? If so, there are multiple options for calculating your independent contractor tax deductions in this category.
There are direct expenses to consider, like renovations and a paint job, as well as indirect expenses, like insurance, utilities, property taxes, and home repairs.
So, how much can you write off for a home office? The most straightforward calculation with the IRS is $5 per square foot up to 300 square feet, which would be a maximum write off of $1,500.
2. Educational expenses
Continuing education can be an important factor in growing a business and attracting new clients.
While coursework can get expensive, all educational expenses are potentially tax-deductible. Webinars, business-related books and subscriptions to professional publications are all eligible as potential deductibles when you file your taxes.
3. Depreciation of property and equipment
As an independent contractor, it’s likely that you purchased property and equipment for your business. Over time, those items lose value. For example, a printer you bought three years ago is worth less now than when you bought it. That’s called depreciation.
According to the IRS, if business purchases will last you more than a year, you can write off the depreciation of their value on your tax return. Repairs on property used for your business can potentially be deducted as well.
4. Car expenses
Some self-employed contractors refer to their car as “their office” since they spend so much time going from job to job. Car expenses and mileage can be one of the largest tax write-offs for these entrepreneurs.
The IRS standard mileage rate for tax deductions is typically near 57 cents per mile. The rules for calculating the rate are updated every year, so it’s good to stay current.
Tolls and parking expenses are also deductible. For extended meetings or projects, these can add up to a significant out-of-pocket expense for an independent contractor. Keep your receipts, and add them to your 1099.
At this point, you might be asking, “Can I write off my car payment?” Unfortunately, the answer from the IRS is no. If you are purchasing a car exclusively for business purposes, you can potentially deduct some expenses. Just be prepared for extra IRS scrutiny since 1099 workers rarely have a vehicle that is only used for business.
5. Business travel
Do you have client meetings out of state or attend industry conferences? When it comes to business trips, your airfare, hotel costs, and 50% of your meal costs can be written off as business expenses.
Even if you extend your trip to travel after the business commitments have ended, you can include those travel costs — just make sure that the amount of leisure days on the trip doesn’t exceed the total amount of business days.
For example, if you fly from California to Paris for a three-day photography conference, you may want to extend your trip for two days of touring. 50% of the costs of meals and accommodations for the extra two days can be deducted, just like the first three days.
6. Cell phone
Do you have one cell phone for both personal use and business? If so, you can write off a portion of your monthly cell phone bill. Similar to your home office, you’ll want to determine what percentage of your phone usage is business vs. personal. You can then deduct that percentage of your phone bill on your 1099 form.
7. Health insurance
100% of your health insurance is one of the many deductible expenses for independent contractors to include on your 1099. In addition to health insurance premiums, expenses such as glasses, nonprescription medications, and visits to the chiropractor can be written off. There may be benefits for your spouse, as well.
8. Business insurance
Business insurance provides important coverage that can protect you from unexpected expenses related to accidents or business mistakes. For example, a professional liability policy can cover expenses if a client accuses you of missing a deadline or making a mistake that costs them money.
In some cases, a client or commercial landlord might ask you for a certificate of insurance before they sign a contract with you.
Your expenses for business insurance coverage can be included in your 1099 tax deductions.
9. Tax advice
There are lots of benefits to being a self-employed contractor, and a qualified tax advisor can help you optimize your strategy when filing your 1099 independent contractor income tax deductions.
While hiring a tax advisor may seem like an unnecessary cost, the help they provide may save you valuable time, and you can write off their fees as a business expense.
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