The 1099 employee taxes deductions are specially made for freelancers, business owners, and other self-employed individuals. Through it, independent contractors could enjoy many perks, including better control over your tax situation, reduced cost when building freelancer networks, and a wide range of deductible expenses.
If you’re a freelancer, too, and you want to reduce the taxes you have to pay, then we got you covered. Below are five of the most common tax deductions 1099 employees are entitled to.
Most 1099 employees work from the comforts of their homes. Either their jobs are location-independent, or they run their businesses in specific parts of their house. Through 1099 employee tax deductions, you could significantly reduce the maintenance costs in your home.
How It Works: The home office deduction is calculated based on how much area of your property is being used as a workplace. For example, if you’re working in an extra room that makes up 20% of your house’s total square footage, then up to 20% of your yearly housing expenses could be deducted from your total tax obligations. However, bear in mind that only expenses directly related to your property (i.e., fixing a door, window, etc) will be counted.
What You Can Deduct: Through the home office deductions, you can minimize taxes from your rent or mortgage, utility costs, repairs and maintenance, and property taxes, among others.
If you think the 1099 employee tax deductions only cover your home office, then here’s a pleasant treat: it includes the office supplies you use, too! This will help you save the money you would otherwise have spent buying more of these necessities.
How It Works: The office supplies tax deduction is calculated by listing every office-supply-related expenses you made within a year. Once you added it all and obtained the sum total, a portion of it will be deducted.
What You Can Deduct: This tax deduction covers everyday items you normally use on your work or business, including pens, paper, staples, postage, and many more. Any office supplies on hand that you don’t normally include in your inventories or records are also included, provided you buy them within the same year as the other items.
Aside from your home office and office supplies, the 1099 employee tax deductions will reduce the taxes on your internet and phone bills as well. This is especially great for anyone who heavily relies on their phones or the internet when working or doing business. Under the right set of conditions, you could even deduct your entire tax!
How It Works: As with the office supplies, a portion of your total annual phone and internet expenses will be deducted from your taxes. If you have a dedicated business cell phone or internet connection, then you can have your entire tax on it waived.
What You Can Deduct: This tax deduction covers your electronic devices, as well as any internet services you’re subscribed to, as long as they’re used specifically for your work or business.
Additionally, the 1099 employee tax deductions covers any car or vehicle you use for work or business purposes. This includes vehicles you rent as much as the ones you actually own. Either way, it can greatly help you recoup some of your ride’s wear and tear.
How It Works: The vehicle use deduction is calculated every end of the year. The number of miles you drove for work or business purposes is tallied. Then the total is multiplied by the IRS’s standard mileage rate (as of 2022, this is 58.5 cents per mile). Then the total mileage will be subtracted from the total rate. Depending on your mileage, you could potentially save up to $1 for every two miles.
What You Can Deduct: You can deduct your vehicle’s mileage, as well as expenses like gas, fluids, toll fees, parking fees, garage rent, insurance, and many more.
Speaking of mileage, the 1099 employee tax deductions include business travel and meal expenses. This can reduce your expenditures if you’re traveling to another state or country for work or business purposes.
How It Works: As of 2022, you can deduct up to 100% of the taxes from your travel and meal expenses. However, if the expenditures are considered too lavish or extravagant, then it might get exempted. Also, if you mixed business and pleasure during the trip, you’ll have to separate the work-related expenses from the personal ones before deducting the tax.
What You Can Deduct: This tax deduction covers your airplane tickets, hotel bookings, taxis fares, and food expenses, among others. Expenses made by your employees are also included. You need to keep your receipts for these expenses to verify if they’re legitimately for work or business purposes.
Being a 1099 employee comes with many challenges, especially if taxes are concerned. Through the 1099 employee tax deductions listed above, you’ll be able to make things less complicated, as well as save some of your hard-earned money along the way.