Top 10 Tax Deductions for 1099 Freelancers

According to the Freelancers Union, freelancers comprise 35 percent of the U.S. workforce. While news articles and bloggers tout the benefits of freelancing, such as working from home, being in charge of your own schedule and selecting your own clients and workload, many of these stories don’t talk about the elephant in the room: the 1099 and the tax implications. So, you need to understand tax deductions for 1099 freelancers.

Top 10 Tax Deductions for 1099 Freelancers

A 1099 doesn’t automatically translate into higher taxes for freelancers. But knowing about the top 10 tax deductions for 1099 freelancers will help you reduce your overall tax debt.

1. Retirement

Since millennials freelance at a higher rate than Gen Xers or baby boomers, it’s no surprise that they underutilize retirement deductions. Additionally, several retirement savings accounts can give freelancers the ability to turn tax debt into retirement savings. The retirement savings plans fall into two main categories:

  • SEP IRA: Simplified Employee Pension IRA
  • SIMPLE IRA: Savings Investment Match Plan for Employees

The IRS offers definitions and setup guidelines on its Retirement Plans for Self-Employed People page. If you don’t have these accounts set up, a professional tax preparer can guide you through the process.

2. Health Insurance

As a self-employed worker, you have health insurance tax help and deductions available to you.

3. Social Security Taxes

Thirdly, if you’re filing a Form 1040 Schedule C, then you can deduct a portion of your Social Security and Medicare taxes. The self-employment tax deduction guidelines are available on the IRS website.

4. Education states, “If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income.”

5. Dues and Memberships

The IRS considers dues for the Chamber of Commerce and other business or professional associations as itemized deductions for 1099 freelancers. So, if you maintain a membership, you should remember to deduct the fees.

6. Marketing

Freelancers can deduct advertising fees under Miscellaneous Expenses. For instance, running advertisements for your services on Facebook, Google AdWords or Twitter will fall under this category. So, you should always try to deduct these expenses when you incur them.

7. Automotive

Commuting to client appointments and all work-related activities fall under standard mileage rates for businesses. Therefore, freelancers can deduct 53.5 cents for business miles in 2017 when using Form 1040. On the other hand, freelancers can choose to deduct auto insurance, depreciation, and repairs instead of mileage with Form 4562.

8. Home Office

If you have a dedicated room in your home that is used as an office, you may take deductions based on the percentage of your home devoted to business use. These deductions are outlined in Publication 587. For instance, you can deduct a percentage of utilities, as well.

9. Equipment

In addition to the home office deductions, equipment for your business falls under miscellaneous itemized deductions (Schedule A) or profit and loss (Schedule C). In today’s digital economy, these deductions apply to computers, software and web-based subscription tools.

10. Meals and Entertainment states, “You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee.” Fortunately, you can get meals and entertainment tax help details on the IRS Entertainment page.

Advantages of Tax Deductions for 1099 Freelancers

As a freelancer, you have many options when claiming deductions. Above all, your ability to claim tax deductions for 1099 freelancers is easier than if you were a full-time employee. Since you are required to pay quarterly taxes, you have the advantage of calculating exactly how much you will owe, eliminating worries about underpaying.


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