What Deductions Are Allowed When You Receive a 1099?
Most individuals who receive 1099s are self-employed independent contractors. As a self-employed taxpayer, you must report your income the same as any other taxpayer. However, the Internal Revenue Service allows self-employed taxpayers to claim certain deductions that reduce their taxable income. Self-employed taxpayers can also claim most of the deductions available to individuals employed by third parties.
If you have an office in your home that you use exclusively for business, you can take a deduction for the expenses you pay to run it. Deductible expenses include utilities, cable, Internet and telephone. However, you can deduct only a portion of the expenses. To determine the amount of your deduction, divide the area of your office by your home's total area and multiply by the amount of your deductible expenses for the year.
If you pay medical, dental or long-term care insurance premiums, you may be able to deduct them. Deductible premiums include those paid for yourself, your spouse or your dependents. If you are not eligible for coverage under an employer's subsidized insurance plan, you can deduct these premiums on line 29 of Form 1040. If you are eligible for other coverage, you can still deduct the premiums on Schedule C.
Supplies and Equipment
If you purchase supplies for your business, such as paper or printer ink, you can deduct them from your taxable income. You can also deduct office furniture or equipment, such as fax machines or computers, but you have the option of deducting the entire expense in the year of purchase or spreading the deduction over seven years. In any case, you will claim the deduction against your business income on Schedule C.
If you travel for business purposes, you can deduct certain travel expenses from your taxable business income. Deductible expenses include transportation costs, lodging and food. However, you can deduct these expenses only if you are traveling outside of your usual working area and stay overnight. If you plan to take travel-related deductions, always keep accurate records of your business trips.
Self-Employment Tax Deduction
As a self-employed taxpayer, you must pay Medicare and Social Security taxes on your business income. Because you must pay both your own portion and the employer portion of these taxes, the IRS allows you to deduct half of what you pay from your taxable income. Claim this deduction on line 27 of Form 1040.
Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.