Learn about a few different 1099 tax write-offs
Taxes are a large portion of most people’s take-home pay. But independent contractors, who must pay both the employer and the employee portion of Medicare and Social Security taxes, pay an even higher percentage of their earnings to the government.
But it’s not all bad news when it comes to taxes for 1099 independent contractors. If you track your business expenses over the year, you can lower your tax bill and keep more of your earnings in your pocket.
How do tax write-offs work for 1099 contractors?
Independent contractors who receive 1099s at the end of the year must file their taxes, just like everyone else. Many independent contractors will receive multiple 1099s because they’ve worked for different companies.
When you file your taxes, you’re essentially telling the IRS how much money you’ve earned. The company that sent you the 1099 is required to send a copy to the IRS as well, so by not filing your taxes you risk penalties and fees.
As an independent contractor, you must pay taxes on your income. But you’ve also spent money on items for your business over the course of the year. The IRS allows you to deduct your business expenses from your earnings, which reduces your income and reduces your taxes.
What can you write off as a 1099 contractor?
What you can write off as a 1099 independent contractor varies based on what you do for your work. If you’re not sure if these write-offs impact your specific business, check with an accountant. They can help you determine what items you can write off as a 1099 contractor.
Here are some of the most common items you can likely write off as an independent contractor.
If you use your vehicle for business reasons, you can write off your mileage (subject to IRS guidelines). Make sure you track your mileage over the course of the entire year. Remember that if you use your vehicle for both business and personal reasons, only the business mileage is deductible.
An alternative to receiving a per-mile deduction is to deduct other vehicle expenses such as maintenance and repairs. This can get tricky and can require a lot of tracking. Depending on your situation, it could be more beneficial for you to use this method to deduct your car expenses. However, you can still only deduct the portion of your expenses that are related to business use, so you’ll still need to track your mileage in addition to tracking all your vehicle-related expenses.
Most of us wouldn’t be able to work without the internet. And if you work from home, you use your home internet for your job. You may be able to deduct all or a portion of your internet expenses from your taxes.
While most of us don’t have a land line anymore, we do use our cell phones for business. You may be able to deduct all or some of your cell phone bill for tax purposes.
If you use advertising, it’s a deductible expense. This could include running ads on Facebook or other online services, or an ad in a print magazine or newspaper. It could also include sponsoring a youth sports team or advertising on a bus bench in your city.
Meals (if for business)
Business meals can include meeting clients to discuss work or potential work, or meals while you’re traveling for work. However, like everything, the IRS has specific rules around what is deductible and how much of it is deductible. Check with your accountant if you aren’t sure if your meals qualify.
If you’re an independent contractor who needs a license to work, you may need continuing education to keep your license (and your job!). This, and other types of work-related education, may be deductible for tax purposes.
These expenses are the most common types, but you may be able to deduct other expenses too. It’s always worth checking with an accountant on your specific situation. Other deductible expenses may include deducting a portion of your utilities and home mortgage interest if you have a home office. They could also be deducting the cost of subscriptions to professional journals you need for your position, the cost of office supplies, and the cost of business insurance.
It rarely makes sense to buy something just so you can deduct it, but if you’re spending money on business items anyway, it’s wise to deduct as much as possible so you can save money on your taxes!
Writing off your business expenses is one of the best ways to reduce your tax bill as an independent contractor. You can’t write off anything if you don’t track how much it cost you in the first place, but we can help with that! indi’s tools make tracking expenses easy and tracking as you go means you don’t have to sift through a pile of paperwork before you file your taxes at the end of the year.
You can easily classify each transaction and even capture your receipts in the indi app. Then, at the end of the year, indi generates a Schedule C report to make filing taxes even easier. An even bigger win? indi Rewards gives you cash back on purchases you make, helping you keep even more cash in your wallet.
Please note that the above is provided on an informational basis and is not a substitute for individual tax planning or for legal, financial, or tax advice.