What Can You Write Off as a 1099 Employee?

The term “1099 employee” is a misnomer for an independent contractor or self-employed individual who receives a Form 1099-NEC detailing non-employee compensation. These workers are responsible for their own tax obligations, as taxes are not withheld from their paychecks. A primary way to manage these obligations is by deducting business expenses to lower taxable income.

To be deductible, an expense must be both “ordinary and necessary” as defined by the Internal Revenue Service (IRS). An ordinary expense is common and accepted within your industry, while a necessary expense is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

Common Business Expense Categories

If you rent a commercial space, the monthly rent and utility payments, such as electricity and water, are fully deductible. The cost of general office supplies like paper, pens, and ink are deductible in the year they are used. Business software, such as accounting programs or industry-specific applications, and professional subscriptions to trade journals are also deductible operational costs.

Other professional and operational costs are also deductible. These include:

• Premiums for business insurance policies, such as general liability or professional liability coverage.
• Fees paid to accountants, lawyers, or other consultants for business-related advice.
• The cost of business licenses and regulatory fees required by your industry or locality.
• Bank fees associated with a dedicated business checking account.

Expenses for advertising through online platforms, print media, or other channels can be claimed. The costs of creating and maintaining a business website, including domain registration and hosting, are also deductible. For business meals with clients, 50% of the cost is deductible, provided the meal is not lavish and has a clear business purpose.

Costs for education and training that maintain or improve skills for your work are deductible. This includes expenses for courses, seminars, and workshops. The cost of books, magazines, and other publications specific to your industry also falls under this category.

Contributions to a self-employed retirement plan, such as a SEP IRA or Solo 401(k), are deductible. You can also deduct premiums paid for medical, dental, and qualified long-term care insurance for yourself, your spouse, and your dependents. This health insurance deduction is not available if you are eligible to participate in an employer-sponsored health plan, such as one from a spouse’s employer.

Key Deduction Calculations and Rules

Certain deductions for significant expenses, like a home office or vehicle, have specific calculation methods. Choosing the right method is important, as one may offer a greater tax benefit depending on your circumstances.

Home Office Deduction

You can calculate the home office deduction using either the actual expense method or the simplified method. The actual expense method requires determining the percentage of your home used regularly and exclusively for business. You then apply this percentage to indirect home expenses, like mortgage interest, property taxes, insurance, and utilities, to find the deductible amount. Direct expenses, such as painting only the office, are fully deductible.

The simplified method allows a standard deduction of $5 per square foot for the business portion of your home, capped at 300 square feet for a maximum deduction of $1,500. This option eliminates tracking individual home expenses but may result in a smaller deduction. You can choose which method to use each year.

Business Use of a Vehicle Deduction

For deducting business use of a vehicle, you can use the standard mileage rate or the actual expense method. The standard mileage rate is a set rate per mile for business use, which the IRS updates annually; for 2025, the rate is 70 cents per mile. This method requires a detailed log of your business mileage, including dates, destinations, and the purpose of each trip.

The actual expense method involves tracking all vehicle operating costs for the year, including gas, insurance, repairs, and depreciation or lease payments. You calculate the percentage of miles driven for business and apply that to your total vehicle costs. If you choose this method in the first year a car is used for business, you must continue using it for that vehicle. If you start with the standard mileage rate, you can switch to the actual expense method in a later year.

Required Documentation and Recordkeeping

Thorough and organized records are required to substantiate business expense deductions. In an IRS audit, the taxpayer must provide evidence for all claimed expenses. Without proper documentation, deductions can be disallowed, resulting in higher tax liability and potential penalties.

Primary source documents include receipts, paid invoices, bank statements, and canceled checks. For each expense, documentation must clearly show the payee, date, amount, and a description of the purchase. Organizing these records by year and expense category simplifies tax preparation.

Certain deductions require detailed logs. For vehicle use, a mileage log must record the date, odometer readings, total mileage, and business purpose for each trip. For business meals, you must document the cost, date, place, business purpose, and the names and business relationship of those present.

You can use digital apps, accounting software, or simple spreadsheets to manage records. It is a good practice to maintain a separate bank account and credit card for your business to avoid mixing personal and business finances. The IRS requires you to keep records for at least three years from the date you file your tax return.

How to Claim Your Deductions

Independent contractors report business income and deductions on Schedule C (Form 1040), Profit or Loss from Business. This form is used to report all your business income and claim your deductions.

On Schedule C, your expense totals are reported in Part II, “Expenses.” The form provides lines for various categories, such as advertising on Line 8, insurance on Line 15, and legal services on Line 17. The vehicle expense you calculated is entered on its designated line.

The total of your expenses from Part II is subtracted from your gross income from Part I to determine your net profit or loss. This figure represents your net earnings from self-employment. It is then carried over to other parts of your tax return.

Your net profit from Schedule C is used to calculate your self-employment tax on Schedule SE. As an independent contractor, you pay both the employee and employer portions of Social Security and Medicare taxes. You can then deduct one-half of your self-employment tax on Schedule 1 of Form 1040. Your net business profit is also reported on Schedule 1 and becomes part of your total income on Form 1040.