Today’s gig economy brings with it good news for independent contractors considering what’s deductible and what isn’t: Write-offs for 1099 contractors abound. If you’re a freelancer, you need to be in the know so you can get all the deductions you deserve.
An independent contractor is anyone – person or business – that offers goods or services to some other entity, either under written contract or through a verbal agreement. This category of workers includes professionals from web designers and writers to real estate agents, truck drivers and more. All these people and many others need to keep invoices and receipts to prove deductible expenses at tax time.
What Can I Deduct As A Contractor?
So what expenses can I deduct as a 1099 contractor? The list is long. It generally includes all the ordinary and necessary expenses related to doing your work. Some of the specific items an independent contractor may be able to deduct are:
- Advertising and operating expenses, including web hosting costs and other internet services, phone lines, business cards and other promotional expenses
- Materials and supplies, including electronics, cameras, printers (depreciation rules may apply to some of these) plus pens, paper, ink greeting cards sent to customers and business-related newspapers, magazines and books
- Home office expenses, as long as the room or area is not used for any other purpose and you follow the rules about what percentage of home expenses like mortgage, homeowner’s insurance, repairs and remodeling can be deducted for a home office
- Travel, including hotel, airfare and usually 50 percent of meal costs (but remember that more days must be spent for business than pleasure and that this category may be heavily scrutinized during an audit)
- Coffee and snacks provided to employees while working when there is a business reason why you need to be eating at work (and there are rules on whether food, which does not include meals, is 50 percent or 100 percent deductible)
- Limited business entertainment if food is included in the price of the ticket, but itemization of what the ticket includes is required (most business entertainment is not deductible)
- Cleaning services for a home office or rented office, and this can sometimes include paying a reasonable amount to a relative to do it
- Childcare for each employee up to $5,000, which can benefit you personally if you have children and your spouse is your employee
- Medical costs, including health insurance, which is deductible for all independent contractors, as well as out-of-pocket costs for glasses, hearing aids, medications and more
- Retirement plan contributions when you choose the right plan and contribute according to specific rules
- Car mileage using the standard deduction or itemizing actually expenses like tolls, parking fees, repairs and more (as long as you really do travel by car as part of your work).
Remember, the IRS won’t correct your return if you fail to claim a deduction to which you’re entitled. Instead, you’ll simply pay more.
A Bookkeeper Is A Great Idea
Every small business – no matter how small – can benefit from the assistance of a bookkeeper in determining what expenses you can deduct as a 1099 contractor and in keeping track of your independent contractor expense account. To make sure you’re on the right track with your deductions, be sure to do your own research or let a bookkeeper or other professional help you make smart decisions. The most important thing is to keep good records, no matter who handles them.
For San Diego bookkeeping services tailored to meet the needs of your business, reach out to AD Bookkeeping Services now. It’s the right decision to keep you well-organized and help you stay on the right side of tax intricacies.