On this page
- What counts as a deductible business expense?
- Which vehicle costs can you write off?
- Can you deduct a home office?
- What about equipment, tools, and software?
- Which everyday costs are easy to miss?
- Are health insurance and retirement contributions deductible too?
- What about self-employment tax and estimated payments?
- What mistakes get self-employed filers in trouble?
- What's the next step if you're behind?
- Related reading
- Frequently asked questions
Self-employed people and 1099 contractors can generally deduct expenses that are both ordinary and necessary for their business, reported on Schedule C, which lowers both income tax and self-employment tax. Here's the short version: the rules are the same federal rules everywhere, but how you document them decides whether a deduction holds up.
This checklist is organized by category so you can compare it to your own books. It's general information, not advice for your specific situation.
What counts as a deductible business expense?
An expense is deductible when it's common in your line of work, helpful to the business, and actually paid. The IRS also expects a business purpose you can explain. If an expense is partly personal, only the business portion counts.
Our deeper guide on what business expenses are actually tax deductible covers the test in more detail. The sections below apply it to the categories 1099 workers use most.
Which vehicle costs can you write off?
If you drive for work, you can generally deduct either actual vehicle expenses or the IRS standard mileage rate for business miles, not both for the same vehicle in the same way. The rate changes most years, so check the current figure before you calculate.
Commuting from home to a regular workplace doesn't count. A trip from your home office to a client site often does. In a spread-out area like the Antelope Valley, the miles add up, so a contemporaneous mileage log (date, destination, purpose, miles) is the single best protection you have. Drivers who work through apps have their own wrinkles, covered in how to handle taxes as an Antelope Valley rideshare or delivery driver.
Can you deduct a home office?
Yes, if part of your home is used regularly and exclusively as your principal place of business. A spare bedroom with a desk you also use as a guest bed generally won't qualify.
You can use the simplified method, which is a set rate per square foot up to a cap, or the regular method, which allocates a share of rent, utilities and similar costs. The regular method is reported on Form 8829, and we walk through it in how to claim the home office deduction line by line. For the plain-English version, see how to deduct a home office on your taxes.
What about equipment, tools, and software?
Business equipment, tools and software are deductible, either in the year you buy them or over several years through depreciation. Small purchases are often expensed immediately. Larger ones, like a work truck or a computer setup, may qualify for the Section 179 deduction, which lets you deduct more of the cost up front within annual limits.
Equipment bought for both business and personal use needs a business-use percentage. Keep receipts and note the date it was placed in service.
Which everyday costs are easy to miss?
These are the lines many first-year contractors leave off:
| Category | Examples | Record to keep |
|---|---|---|
| Phone and internet | Business share of your bill | Bills plus a reasonable allocation |
| Professional fees | Tax prep, legal, bookkeeping | Invoices |
| Insurance | Liability, professional, business vehicle | Policy statements |
| Marketing | Website, ads, business cards | Receipts |
| Licenses and permits | City business license, trade licenses | Renewal receipts |
| Education | Courses and materials tied to your current trade | Receipts, course description |
| Bank and payment fees | Card processing, platform fees | Monthly statements |
Meals are the category with the most confusion. Business meals are generally only partly deductible, and you need to note who you met and why. Personal meals while working at your desk are not deductible.
Are health insurance and retirement contributions deductible too?
Often, yes, and they aren't Schedule C expenses. Self-employed health insurance premiums can generally be deducted on your personal return if you meet the eligibility rules, including not being eligible for an employer plan through you or your spouse. Contributions to a SEP IRA or solo 401(k) can also reduce taxable income, subject to annual limits.
You may also qualify for the qualified business income deduction, which can reduce taxable income further depending on your income and type of work. Because eligibility depends on your whole return, this one is worth reviewing with a professional. Our tax planning services cover exactly this kind of look-ahead.
What about self-employment tax and estimated payments?
Deductions reduce self-employment tax too, since it's calculated on net profit. Half of the self-employment tax itself is deductible on your personal return.
Because no one withholds tax from 1099 income, you generally need to make quarterly payments. Missing them can trigger penalties. See quarterly estimated taxes for the self-employed for how the amounts and due dates work, and tax planning for 1099 contractors in California for what to do before year-end.
What mistakes get self-employed filers in trouble?
The same few problems come up repeatedly:
- Mixing personal and business money. One account for everything makes every deduction harder to defend.
- Round-number guesses. Estimates with no receipts or logs invite questions.
- Writing off hobby costs. The activity needs a real profit motive.
- Ignoring income with no 1099. All income is reportable, whether or not you got a form. See filing taxes self-employed with no 1099.
- Deducting too much, too obviously. Consistently large losses or oversized categories are among the things that can draw IRS attention.
Clean monthly books solve most of this. Our bookkeeping services exist for contractors who'd rather not rebuild a year of receipts in April.
What's the next step if you're behind?
Start with a separate business bank account, then sort the last twelve months of transactions into the categories above. Pull mileage from your calendar if you didn't log it, and gather insurance and license statements. That's enough for a preparer to work from.
If you'd like help, SBZ Tax is a walk-in office local to Palmdale, at 190 Sierra Ct Ste 335, Palmdale, CA 93550, and also serves clients remotely. You can call 818-748-2020, see our Palmdale tax services, or book a free consultation.
Related reading
Frequently asked questions
Can I deduct expenses if I only got one 1099?
Yes. Deductions depend on your actual business expenses, not the number of clients or forms you received. You still report income and expenses on Schedule C.
Do I need receipts for every deduction?
Generally you need records that show the amount, date, place and business purpose. Bank and card statements help, but receipts and logs are stronger support.
Is it better to take the standard mileage rate or actual expenses?
It depends on the vehicle, how much you drive and your costs. The method you choose in a vehicle's first business year can limit your options later, so many people review it with a preparer first.
Can I deduct my business expenses if I lost money this year?
Often yes, but losses are subject to limits and to the requirement that the activity be run for profit. A professional can check how a loss interacts with the rest of your return.
This article is general information, not tax advice for your specific situation. Talk to a qualified tax professional before acting on it.
